TOWN OF OAK ISLAND NORTH CAROLINA

Transcription

TOWN OF OAK ISLAND
NORTH CAROLINA
ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2012
TOWN OF OAK ISLAND, NORTH CAROLINA
TABLE OF CONTENTS
For the Year Ended June 30, 2012
EXHIBIT/SCHEDULE
INTRODUCTORY SECTION
List of Principal Officials
Organizational Chart
FINANCIAL SECTION
Independent Auditor's Report
Management's Discussion and Analysis
Basic Financial Statements:
Government-Wide Financial Statements
1
2
Statement of Net Assets
Statement of Activities
Fund Financial Statements:
3
4
5
6
7
8
Balance Sheet - Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund
Statement of Net Assets - Proprietary Funds
Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds
Statement of Cash Flows - Proprietary Funds
Notes to the Financial Statements
Required Supplemental Financial Data:
A-1
A-2
A-3
A-4
Law Enforcement Officers' Special Separation Allowance - Schedule of Funding Progress
Law Enforcement Officers' Special Separation Allowance - Schedule of Employer Contributions
Law Enforcement Officers' Special Separation Allowance - Notes to the Required Schedules
Other Postemployment Benefits - Schedule of Funding Progress
Other Postemployment Benefits - Schedule of Employer Contributions
Other Postemployment Benefits - Notes to the Required Schedules
Supplementary Statements and Schedules:
Individual Fund Statements and Schedules:
Governmental Funds
B-1
B-2
B-3
B-4
B-5
B-6
B-7
B-8
B-9
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Capital Reserve Fund
Combining Balance Sheet - Other Governmental Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Other Governmental Funds
Combining Balance Sheet - Other Governmental Special Revenue Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Other Governmental Special
Revenue Funds
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Special Revenue Accomodations Tax Fund
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Special Revenue Emergency 911 Fund
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Special Revenue Beach Preservation Fund
TOWN OF OAK ISLAND, NORTH CAROLINA
TABLE OF CONTENTS
EXHIBIT/SCHEDULE
B-10
B-11
B-12
B-13
Combining Balance Sheet - Other Governmental Capital Project Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Other Governmental Capital
Project Funds
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Capital Projects - Police
Headquarters Project
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - Capital Projects - Town
Hall Replacement Project
Proprietary Funds
C-1
C-2
C-3
C-4
C-5
C-6
C-7
C-8
C-9
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) - Budget and Actual (Non-GAAP) Water Fund
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) - Budget and Actual (Non-GAAP) Wastewater Fund
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) - Budget and Actual (Non-GAAP) Wastewater Capital Projects Fund
Combining Statement of Net Assets - Other Enterprise Funds
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Other Enterprise Funds
Combining Statement of Cash Flows - Other Enterprise Funds
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) - Budget and Actual (Non-GAAP) - Solid
Waste Fund
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) - Budget and Actual (Non-GAAP) South Harbour Golf Course Fund
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) - Budget and Actual (Non-GAAP) Sewer District Fund
Other Schedules
D-1
D-2
D-3
Schedule of Ad Valorem Taxes Receivable
Analysis of Current Tax Levy - Town-Wide Levy
Statement of Changes in Assets and Liabilities - Agency Fund
Compliance Section
Report on Internal Control Over Financial Reporting and On Compliance and Other
Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards
Report on Compliance With Requirements Applicable To Each Major Federal Program and
Internal Control Over Compliance In Accordance With Applicable Sections of OMB
Circular A-133 and the State Single Audit Implementation Act
Report on Compliance With Requirements Applicable To Each Major State Program and
Internal Control Over Compliance In Accordance With Applicable Sections of OMB
Circular A-133 and the State Single Audit Implementation Act
E-1
E-2
E-3
E-4
Schedule of Expenditures of Federal and State Awards
Schedule of Findings and Questioned Costs
Corrective Action Plan
Summary Schedule of Prior Audit Findings
Introductory Section
Town of Oak Island, North Carolina
List of Principal Officials
June 30, 2012
Mayor and Town Council
Betty W. Wallace, Mayor
James B. Medlin, Mayor Pro Tem
Dara F. Royal
Carol Painter
Danny Kiser
Jeff Winecoff
Town Officials
Tom Hogg
Lisa Stites
Van Eddinger
Chris Anselmo
Eugene Kudgus
Bonnie M. Schwerd
David Kelly
Kellie Beeson
Sheila Bell
Interim Town Manager
Town Clerk
Chief of Police
Interim Fire Chief
Public Services Director
Finance Director
Public Utilities Director
Parks and Recreation Director
Tax Collector/Customer Service
Organizational Chart
June 30, 2012
Citizens of Oak Island
Mayor and Town
Council
Advisory Boards and
Committees
Town Manager
Town Attorney
Town Clerk
Finance Director
Police Chief
Fire/EMS Chief
Public Services Director
Parks & Recreation Director
Financial Section
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BERRY.
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. PADGETT&
CERTIFIED
OFFICES
CHANDLER,PLLC
PUBLIC
ACCOUNTANTS
IN
Southport,
NC
Shallotte,
NC
IRA WAYNE
H. MENTON
J. MICHAEL
BERRY,
PADGETT,
CHANDLER,
CPA
CPA
CPA
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and Members of the
Town Council
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of
the Town of Oak Island, North Carolina as of and for the year ended June 30, 2012, which collectively comprise the
Town's basic financial statements as listed in the table of contents. These financial statements are the responsibility
of the Town of Oak Island's management.
Our responsibility is to express opinions on these basic financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the basic financial statements are free of material misstatement. The financial
statements of the Town of Oak Island Board of Alcoholic Control were not audited in accordance with Government
Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinions.
In our opinion, based on our audit, the financial statements referred to above present fairly, in all material
respects, the financial position of the governmental activities, the business-type activities, the discretely presented
component unit, each major fund, and the aggregate remaining fund information of the Town of Oak Island, North
Carolina as of June 30, 2012, and the respective changes in financial position and cash flows, where appropriate, and
the respective budgetary comparison for the General Fund for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated May 28, 2013 on our
consideration of the Town of Oak Island's internal control over financial reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of the report
is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that
testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of our audit.
Accounting principles generally accepted in the United States of America require that Management's
Discussion and Analysis and the Law Enforcement Officers' Special Separation Allowance's and the Other
Postemployment Benefits' Schedule of Funding Progress and Schedule of Employer Contributions be presented to
supplement the basic financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or
PO. BOX
J
0339 / J J 23 N. HOWE STREET/ SOUTHPORT, NORTH CAROLINA 2846 J /910-457-9455
FAX 9 J 0-457-5998
PO. BOX 579 / SHALLOTIE, NORTH CAROLINA 28459 / 9 J 0-754-4351 FAX 9 J 0-754-293 J
MEMBER OF: AICPA's, Private Companies Practice Section I NCA CPA's
Town of Oak Island,
North Carolina
Page 2
May 28, 2013
historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries
of management about the methods of preparing the information and comparing the information for consistency with
management's responses to our inquires, the basic financial statements, and other knowledge we obtained during our
audit of the basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.
Our audit was performed for the purpose of forming an opinion on the financial statements that collectively
comprise the basic financial statements of the Town of Oak Island, North Carolina. The combining and individual
non-major fund financial statements, budgetary schedules and other schedules and the introductory and statistical
sections, as well as the accompanying schedule of expenditures of federal and State awards as required by U.S.
Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations, and the State Single Audit Implementation Act, are presented for purposes of additional analysis and
are not a required part of the basic financial statements. Such information is the responsibility of management and
was derived from and relates directly to the underlying accounting and other records used to prepare the basic
financial statements. The accompanying schedule of expenditures of federal and State awards is presented for
purposes of additional analysis as required by the U. S. Office of Management and Budget Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations, and the State Single Audit Implementation Act, and is also
not as required part of the basic financial statements.
The combining and individual non-major fund financial
statements budgetary schedules, other schedules and the accompanying schedule of expenditures of federal and
State awards have been subjected to the auditing procedures applied in the audit of the basic financial statements
and certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the combining and individual non-major fund financial statements, budgetary
schedules, other schedules and the schedule of expenditures of federal and State awards are stated in all material
respects in relation to the basic financial statements as a whole.
May 28,2013
Management’s Discussion and Analysis
MANAGEMENT'S
DISCUSSION AND ANALYSIS
As management of the Town of Oak Island, we offer readers of the Town of Oak Island's financial statements this
narrative overview and analysis of the financial activities of the Town of Oak Island for the fiscal year ended June 30,
2012. We encourage readers to read the information presented here in conjunction with additional information that
we have furnished in the Town's financial statements, which follow this narrative.
Financial Highlights
•
•
•
•
•
•
•
•
The assets of the Town of Oak Island exceeded its liabilities at the close of the fiscal year by $74,219,471
(net assets).
The government's total net assets decreased by $3,659,079. This primary driver in this decrease was a net
operating loss in the Town's Business-type Activities, which are comprised of the Water, Wastewater, Solid
Waste and Golf Course Funds.
As of the close of the current fiscal year, the Town of Oak Island's governmental funds reported combined
ending fund balances of $9,533,520, with a net decrease of $1,085,483 in fund balance. Approximately 55.7
percent of this total amount, or $5,314,203, is classified as non spendable or restricted.
At the end of the current fiscal year, fund balance for the General Fund not classified as restricted, nonspendable or committed was $3,372,614, or 20.5% percent of general fund expenditures net of transfers for
the fiscal year.
The Town's fund balance available for appropriation was $3,797,753 or 28.34% of general fund expenditures,
while total fund balance available for appropriation including restricted cash and investments represented
$4,465,453, which represented 33.32% of the total general fund expenditures.
The Town of Oak Island's total debt decreased by $828,525 (less than 1%) during the current fiscal year.
This net decrease was the result of paying down bond, installment and capital lease debt while also issuing
additional installment debt and receiving additional State Revolving Loan Fund proceeds during the fiscal
year.
The Town of Oak Island was able to comply with the rate covenants as defined in the Revenue Bonds Trust
Agreement.
Moody's reviewed the Town's bond rating during fiscal year 2012 and reaffirmed the Town's A2 Enterprise
System Bond Rating.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to Town of Oak Island's basic financial
statements. The Town's basic financial statements consist of three components; 1) government-wide financial
statements, 2) fund financial statements, and 3) notes to the financial statements (see Figure 1). The basic financial
statements present two different views of the Town through the use of government-wide statements and fund
financial statements. In addition to the basic financial statements, this report contains other supplemental information
that will enhance the reader's understanding of the financial condition of the Town of Oak Island.
4601 E. Oak Island Drive • Oak Island, North Carolina 28465
Phone: (910) 278-5011 • Fax: (910) 278-3400 • Website: www.oakislandnc.com
Required Components of Annual Financial Report
Figure 1
Management's
Basic
Discussion and
Financial
Analysis
Statements
Government-Wide
Fund
Notes to
Financial
Financial
Financial
Statements
Statements
Statements
Summary
Detail
Basic Financial Statements
The first two statements (Exhibits 1 and 2) in the basic financial statements are the Government-wide Financial
Statements. They provide both short and long-term information about the Town’s financial status.
The next statements (Exhibits 3 through 8) are Fund Financial Statements. These statements focus on the
activities of the individual parts of the Town’s government. These statements provide more detail than the
government-wide statements. There are three parts to the Fund Financial Statements: 1) the governmental funds
statements; 2) the budgetary comparison statements; and 3) the proprietary fund statements.
The final section of the basic financial statements is the notes. The notes to the financial statements explain in detail
some of the data contained in those statements. Following the notes, supplemental information is provided to
show details about the Town’s individual funds. Budgetary information required by the North Carolina General
Statutes also can be found in this part of the statements.
Government-Wide Financial Statements
The government-wide financial statements are designed to provide the reader with a broad overview of the Town’s
finances, similar in format to a private-sector business. The government-wide statements provide short and longterm information about the Town’s financial status as a whole.
The two government-wide statements report the Town’s net assets and how they have changed. Net assets are the
difference between the Town’s total assets and total liabilities. Measuring net assets is one way to gauge the Town’s
financial condition.
The government-wide statements are divided into three categories: 1) governmental activities; 2) business-type
activities; and 3) component units. The governmental activities include most of the Town’s basic services such as
public safety, parks and recreation, transportation, environmental protection and general administration. Property
taxes and state and federal grant funds finance most of these activities. The business-type activities are those that
the Town charges customers to provide. These include the water, wastewater, solid waste and golf course services
offered by the Town of Oak Island. The final category is the component unit. Although legally separate from the
town, the ABC Board is important to the Town. The Town exercises control over the Board by appointing its
members and the Board is required to distribute its profits to the Town.
The government-wide financial statements are on Exhibits 1 and 2 of this report.
Fund Financial Statements
The fund financial statements (see Figure 1) provide a more detailed look at the Town’s most significant activities. A
fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for
specific activities or objectives. The Town of Oak Island, like all other governmental entities in North Carolina, uses
fund accounting to ensure and reflect compliance (or noncompliance) with finance-related legal requirements, such
as the General Statutes or the Town’s budget ordinance. All of the funds of the Town of Oak Island can be divided
into three categories: governmental funds, proprietary funds and fiduciary funds.
Governmental Funds: Governmental funds are used to account for those functions reported as governmental
activities in the government-wide financial statements. Most of the Town’s basic services are accounted for in
governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what
monies are left at year-end that will be available for spending in the next year. Governmental funds are reported
using an accounting method called modified accrual accounting that provides a short-term spending focus. As a
result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her
determine if there are more or less financial resources available to finance the Town’s programs. The relationship
between government activities (reported in the Statement of Net Assets and the Statement of Activities) and
governmental funds is described in a reconciliation that is a part of the fund financial statements.
The Town of Oak Island adopts an annual budget for its General Fund, as required by the General Statutes. The
budget is a legally adopted document that incorporates input from the citizens of the Town, the management of the
Town, and the decisions of the Council about which services to provide and how to pay for them. It also authorizes
the Town to obtain funds from identified sources to finance these current period activities. The budgetary statement
provided for the General Fund demonstrates how well the Town complied with the budget ordinance and whether or
not the Town succeeded in providing the services as planned when the budget was adopted. The budgetary
comparison statement uses the budgetary basis of accounting and is presented using the same format, language,
and classifications as the legal budget document. The statement shows four columns: 1) the original budget as
adopted by the council; 2) the final budget as amended by the council; 3) the actual resources, charges to
appropriations, and ending balances in the General Fund; and 4) the difference or variance between the final budget
and the actual resources and charges.
Proprietary Funds: The Town of Oak Island has one type of proprietary fund. Enterprise Funds are used to report
the same functions presented as business-type activities in the government-wide financial statements. The Town of
Oak Island uses enterprise funds to account for its water, wastewater, solid waste and golf course operations. These
funds are the same as those functions shown in the business-type activities in the Statement of Net Assets and the
Statement of Activities.
Proprietary funds provide the same type of information as the government-wide financial statements, only in more
detail. The proprietary fund financial statements provide separate information for the water and the wastewater
operations, both of which are considered to be major funds of the Town. Conversely, the solid waste and golf course
operations are combined into a single, aggregated presentation in the proprietary fund financial statements.
Individual fund data for the solid waste and golf course funds is provided in the form of combining statements
elsewhere in this report.
Fiduciary Funds: Fiduciary funds are used to account for resources held for the benefit of parties outside the
government. The Town of Oak Island has one fiduciary fund, which is used for funds collected by the Town for fines
and forfeitures but due to the Board of Education in accordance with the laws set forth in the Constitution of the State
of North Carolina.
Notes to the Financial Statements: The notes provide additional information that is essential to a full understanding
of the data provided in the government-wide and fund financial statements. The notes to the financial statements can
be found following the financial statements in this report.
Other Information: In addition to the basic financial statements and accompanying notes, this report also presents
certain required supplementary information concerning the Town of Oak Island’s progress in funding its obligation to
provide pension benefits to its public safety employees and other post-employment health benefits to employees.
Required supplementary information can be found beginning on Exhibit A-1 of this report.
Government-Wide Financial Analysis
Figure 2
Town of Oak Island Net Assets
Governmental Activities
2012
Current and other assets
$
Capital assets
10,838,432
Business-Type Activities
2011
$
11,957,037
2012
$
33,922,215
Total
2011
$
40,532,005
2012
$
44,760,647
2011
$
52,489,042
32,146,221
32,630,396
119,776,767
119,194,861
151,922,988
151,825,257
42,984,653
44,587,433
153,698,982
159,726,866
196,683,635
204,314,299
14,957,986
16,168,602
104,556,907
104,031,662
119,514,893
120,200,264
1,257,591
1,501,207
1,691,680
4,734,278
2,949,271
6,235,485
16,215,577
17,669,809
106,248,587
108,765,940
122,464,164
126,435,749
18,239,987
17,522,549
22,380,413
22,390,247
40,620,400
39,912,796
Restricted
5,288,746
6,567,058
20,509,542
30,693,040
25,798,288
37,260,098
Unrestricted
3,240,343
2,828,017
4,560,440
(2,122,361)
7,800,783
705,656
Total assets
Long-term liabilities outstanding
Other liabilities
Total liabilities
Net assets:
Invested in capital assets,
net of related debt
Total net assets
$
26,769,076
$
26,917,624
$
47,450,395
$
50,960,926
$
74,219,471
$
77,878,550
As noted earlier, net assets may serve over time as one useful indicator of a government’s financial condition. The
assets of the Town of Oak Island exceeded liabilities by $74,219,471 as of June 30, 2012. The Town’s net assets
decreased by $3,659,079 for the fiscal year ended June 30, 2012. The most substantial part of this decrease in net
assets is generated from the Town’s Wastewater operations. The Town’s investment in capital assets (e.g., land,
buildings, machinery, equipment and utilities); less any related debt still outstanding that was issued to acquire those
items is $40,620,400. The Town uses these capital assets to provide services to citizens; consequently, these
assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of
related debt, it should be noted that the resources needed to repay this debt must be provided from other sources,
since the capital assets themselves cannot be used to repay these liabilities. An additional portion of the Town’s net
assets, in the amount of $25,798,288, represents resources that are subject to external restrictions on how they may
be used. The remaining balance of $7,800,783 is unrestricted.
Several particular aspects of the Town’s financial operations influenced the total governmental net assets:

The Town adopted a Fiscal Year 2012 budget with a revenue neutral tax rate of 27.5 cents per $100
valuation.

After a two-year trend of declining accommodations tax revenues in the fiscal years ending in 2009 and
2010, which was attributed to the global economic downturn, the accommodations tax revenues on shortterm rental property increased 7.1% in FY 2011 and climbed another 12.4% in the fiscal year ending June
30, 2012.

Sales Taxes continue the multi-year pattern of declines with the FY 2012 numbers coming in at an 11.1%
decrease from FY 2011.

The Town Fire Department continued to receive funds under federal FEMA grants this year to assist with
the firefighter salaries and the purchase of various equipment and necessary supplies.

The Town has continued to identify methods to reduce expenditures across all functions of the Town
including the reduction of personnel costs through efforts such as reductions in force and the suspension of
merit raises.
Figure 3
Town of Oak Island's Changes in Net Assets
2012
2012
2011
Total
2011
2012
2011
Revenues:
Program revenues:
Charges for services
$
Operating grants and contributions
2,110,379
$
2,228,229 $
9,761,791
$
6,381,406 $ 11,872,170
$
8,609,635
629,907
785,599
49,909
5,825 $
679,816
791,424
16,236
129,225
3,240,574
34,194,519 $
3,256,810
34,323,744
Property taxes
6,866,837
6,699,824
-
- $
6,866,837
6,699,824
Local option sales tax
1,458,619
1,639,858
-
- $
1,458,619
1,639,858
Accommodation tax
1,068,434
950,143
-
- $
1,068,434
950,143
Capital grants and contributions
General revenues:
$
Grants and contributions not
$
restricted to specific programs
Other
Total revenues
613,268
610,523
139,575
143,195
$ 12,903,255
$ 13,186,596 $ 13,066,414
$
$
-
- $
613,268
20,496 $
153,715
163,691
$ 40,602,246 $ 25,969,669
$ 53,788,842
14,140
-
610,523
Expenses:
2,778,225 $
-
- $
2,736,737
Public safety
5,466,506
5,627,760
-
-
5,466,506
5,627,760
Transportation
2,596,254
1,175,304
-
-
2,596,254
1,175,304
226,484
186,828
-
-
226,484
186,828
1,264,990
1,260,386
-
-
1,264,990
1,260,386
600,751
654,795
General government
Environmental protection
Cultural and recreation
Interest on long-term debt
2,736,737
-
600,751
654,795
2,400,664
2,384,420
13,052,025
9,135,515
13,052,025
9,135,515
1,251,256
1,185,626
1,251,256
1,185,626
$ 12,705,561 $ 29,595,667
$ 24,388,859
-
-
2,400,664
Wastewater
-
-
Nonmajor funds
-
-
$ 12,891,722
2,778,225
2,384,420
-
Water
Total expenses
$
$ 11,683,298 $ 16,703,945
Increase in net assets
before transfers
Transfers
11,533
(127,000)
1,503,298
977,705
$
(3,637,531)
127,000
$ 27,896,685
(977,705)
$
(3,625,998)
-
$ 29,399,983
-
Extraordinary item: environmental
remediation costs
Increase in net assets
Net assets, July 1
Net assets, June 30
(33,081)
(148,548)
(21,022)
2,459,981
(3,510,531)
26,918,980
(21,022)
(21,022)
(3,659,079)
29,378,961
26,917,624
24,457,643
$ 50,960,926
24,041,946
77,878,550
48,499,589
$ 26,769,076
$ 26,917,624
$ 47,450,395
$ 50,960,926
$ 74,219,471
$ 77,878,550
Governmental activities: Governmental activities decreased the Town’s net assets by $148,548, accounting for
4.1% of the total decline in the government’s net assets. Key elements of this net decrease are as follows:


The Town saw an increase of $167,013 in property tax revenues in fiscal year 2012 as a result of small
increases in the valuation and collection rates from FY 2011.
In fiscal year 2012, the Town completed the first phase of a major street repair and improvement project
within the Town. This $1.48 Million project was completed in May of 2012 with State Powell Bill Funds that
had been saved for the past few years for that purpose.





The Town’s sales tax revenues continued trending down at $181,239 lower than the prior year’s level.
The Town experienced a 12.4% increase in accommodation tax revenues collected during the current fiscal
year. This upward trend is attributed to increased collection efforts and tourism-based economic growth.
The Town continues to reduce budgeted expenditures across all functions of the government and continues
to look for ways to reduce costs. Travel budgets were reduced for FY 2012 with travel costs being limited to
amounts necessary for employees to maintain required work certifications. The Town funded only capital
outlay items that were deemed absolutely necessary.
The large prior year transfer from the enterprise funds to the governmental funds was eliminated and
transfers of governmental funds totaling $127,000 were made to support the Golf Course and Solid Waste
operations.
Environmental remediation costs are due to monitoring requirements for the Police Headquarters’ site where
soil contamination was found during the construction period in previous years.
Business-type activities: Business-type activities decreased the Town of Oak Island’s net assets by $3,510,531,
accounting for 95.9% of the total decline in the government’s net assets. The key elements of this net decrease are
as follows:


Due to the new wastewater system starting up and the connection of new customers to the system, the
Town saw an increase of $3.38M in total enterprise system service charges. While this increase brought
the revenues much closer to those projected for the systems, the operating expenses still exceeded the
revenues in the Wastewater Fund by roughly $3.9M and this netted with small gains in the Water and NonMajor funds caused the system to finish with an operating loss of $3,637,531 prior to interfund transfers.
The Town received additional grant and loan proceeds for the Wastewater Capital Project during Fiscal
Year 2012 including a NC Rural Center grant in the amount of $500,000 and additional NC State Revolving
Loan Funds of $1,799,811.
Financial Analysis of the Town’s Funds
As noted earlier, the Town of Oak Island uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements.
Governmental Funds: The focus of the Town of Oak Island’s governmental funds is to provide information on nearterm inflows, outflows, and balances of usable resources. Such information is useful in assessing the Town of Oak
Island’s financing requirements.
The general fund is the chief operating fund of the Town of Oak Island. At the end of the current fiscal year, the
Town’s fund balance available for appropriation in the General Fund was $4,465,463 including restricted cash and
$3,797,753 net thereof. The total fund balance was $5,204,841. The Governing Body of the Town of Oak Island has
determined that the Town should strive to maintain an available fund balance of 25% of general fund budget in case
of unforeseen needs or opportunities, in addition to meeting the cash flow needs of the Town. The Town currently
has an available fund balance of 28.34% of general fund expenditures, while total fund balance available for
appropriation including restricted cash and investments represents 33.32% of the total general fund expenditures.
Through conservative revenue estimates, reductions in general fund expenditures and use of grant opportunities, the
Town was able to reach its targeted level of funds available for appropriation. This is well above the regulatory
suggested minimum level of one month’s operating cash, at 8%.
At June 30, 2012, the governmental funds of the Town of Oak Island reported a combined fund balance of
$9,533,520 with a net decrease in fund balance of $1,085,483. Included in this change in fund balance are the net
effects of a decrease in General Fund balance together with increases in Other Governmental Funds. This decrease
in the General Fund can be attributed to the use of roughly $1.5M in restricted Powell Bill funds for a street paving
project within the Town.
General Fund Budgetary Highlights: During the fiscal year, the Town revised the budget on several occasions.
Generally, budget amendments fall into one of three categories: 1) amendments made to adjust the estimates that
are used to prepare the original budget ordinance once exact information is available; 2) amendments made to
recognize new funding amounts from external sources, such as Federal and State grants; and 3) increases in
appropriations that become necessary to maintain services.
In Fiscal Year 2012, the significant amendments to the budget reduced appropriations in efforts to decrease
allowable expenses in line with the lower level of recognized revenues for the fiscal year. Additional changes were
made to supply the various needs that support the functions of the departments and to appropriate special revenues
received for specific purposes.
Proprietary Funds: The Town’s proprietary funds provide the same type of information found in the governmentwide statements but in more detail. Unrestricted net assets of the Water Fund at the end of the fiscal year amounted
to $3,798,760, and those for the Wastewater Fund amounted to $420,825. The total change in net assets for both
funds was $459,514 and $(3,869,535) respectively. The net assets of the non-major proprietary funds, which include
the Solid Waste and South Harbour Golf Course Funds, amounted to $340,855, which represents a $100,510
decrease from the prior year. The total change in net assets for the proprietary funds was a decrease of $3,510,531.
This net decrease in assets was driven by net losses related to insufficient user charges and the high level of interest
expense related to the Wastewater System debt service. The Town used excess revenues from Sewer Assessments
received in prior years to cover these losses and maintain the necessary Cash and Debt Covenant coverage levels
during the fiscal year.
Capital Asset and Debt Administration
Capital assets: The Town of Oak Island’s investment in capital assets for its governmental and business-type
activities as of June 30, 2012, totals $151,922,988 (net of accumulated depreciation). These assets include buildings,
land, machinery and equipment, park facilities, vehicles, and utility systems.
Major capital asset transactions during the year include the following additions:




Construction in Progress for the Wastewater Project in the amount of $2,527,907.
The purchase of 4 new vehicles for the police department at a total cost of $120,859.
The purchase of 2 used ambulances and one used fire truck for a total of $325,348.
The Town’s share of the relocation of water lines along the bridge corridor in the amount of $425,698.
Figure 4
Capital Assets
Land
$
Buildings
2012
2012
2011
9,499,923
$
9,499,923 $
2011
3,282,807
$ 14,184,525
28,616,179
2,095,432
2,122,994
87,050
391,074
395,790
204,200
270,226
1,120,613
1,007,631
6,043,383
6,795,613
6,532,962
7,410,966
73,471
-
183,245
115,070
217,937
25,007
34,516
282,637
252,453
3,270,702
3,394,982
83,940,477
83,167,225
87,211,179
86,562,207
250,000
250,000
-
250,000
250,000
10,622,045
11,825,808
10,622,045
14,215,731
1,997,227
2,122,994
98,205
323,396
308,740
67,678
Heavy motor vehicles
916,413
737,405
Equipment
489,579
615,353
Office equipment
109,774
115,070
Computers and electrical equipment
257,630
Motor vehicles
Infrastructure
Construction in progress
Intangible assets
-
Other non-depreciable assets
-
Total
$
32,146,221
$ 32,630,396 $
4,684,602 $
2011
29,247,308
15,367,992
$
2012
12,782,730
15,031,577
Improvements other than buildings
Total
13,248,187
11,825,808
119,776,767
285,397
-
$ 119,194,861 $
151,922,988
285,397
$ 151,825,257
Additional information on the Town’s capital assets can be found in Note 5 of the Basic Financial Statements.
Long-term debt: As of June 30, 2012, the Town of Oak Island had bonded debt outstanding of $90,663,348 all of
which represents bonds secured solely by specified revenue sources (specifically, the Town’s Utility Enterprise
System revenues). The Town has no issuances of general obligation bonds, but has just over $14M in outstanding
installment purchases debt, as well as capital leases amounting to $981,046 and revolving loan funds of
$12,604,726.
Figure 5
Town of Oak Island Outstanding Debt General Obligation and Revenue Bonds
Installment purchases
Capital leases
2012
2011
2012
$ 13,317,800
$ 14,777,318
981,046
846,226
$
781,733
Total
2011
$
2012
584,086
-
2011
$ 14,099,533
$ 15,361,404
981,046
846,226
Revolving loan fund
-
12,604,726
11,116,037
12,604,726
11,116,037
Revenue notes
-
315,947
473,921
315,947
473,921
-
90,663,348
91,695,537
90,663,348
91,695,537
$104,365,754
$ 103,869,581
$118,664,600
$ 119,493,125
Revenue bonds
Total
$ 14,298,846
$ 15,623,544
The Town of Oak Island’s total debt decreased during the fiscal year by $828,525, which is equivalent to less than
one percent. This was the net effect of reductions to outstanding revenue bond and installment debt along with
increases in capital leases and state revolving loan debt.
North Carolina general statutes limit the amount of general obligation debt that a unit of government can issue to 8
percent of the total assessed value of taxable property located within that government’s boundaries. The legal debt
margin for Town of Oak Island as of June 30, 2012, is $184,950,897. The Town’s general obligation debt is equal to
$14,298,846 or 0.57% of the total assessed value of property.
Additional information regarding the Town of Oak Island’s long-term debt can be found in Note 11.
Economic Factors and Next Year’s Budgets and Rates




The unemployment rate for Brunswick County was 8.9% at June 30, 2012, which reflects a 1.4% decrease
from a year ago. While this decrease is a positive sign, the continued high unemployment rate is indicative
of the sluggish economy.
The Town is experiencing economic trends similar to national trends, with high unemployment levels, a
continued pattern of fewer new home construction projects and high property foreclosures rates.
The Town is a resort beach community and its economy can be reflected in the accommodations taxes
collected on weekly rentals. During the current fiscal year, the Town saw a 12.4% increase in
accommodation tax revenues.
The Town’s population estimate for 2011 was 6,874, which is an increase of less than one percent of the
population count done in 2010.
Budget Highlights for the Fiscal Year Ending June 30, 2013
Governmental Activities: The 2012-2013 Budget was adopted with a tax rate at $0.275 per $100 valuation. The
Town’s property values increased slightly from its prior year valuation of $2,407,882,084 to $ 2,490,621,788. The
Town adopted its FY 2012-2013 budget without the inclusion of any appropriated fund balance for budget balancing.
Sales tax revenue distributions were projected to remain relatively flat for the 2012-2013 budget year; therefore, the
Town projected no major increase nor decrease in this revenue source.
As a response to the uncertain economic times, the Town adopted a very conservative budget which included
significant reductions in the operating expenditures in the General Fund while still maintaining similar levels of
service. The Town refrained from offering any cost of living adjustments for its employees and continued to
reallocate resources for better efficiency. The Town implemented a reduction in force in April of 2013 that
restructured some of the Public Works division and eliminated 4 positions. Additional vacancies throughout the Town
continue to be evaluated prior to permitting the filling of such positions. The Town solicited bids for employee health
benefits in an attempt to manage the rising costs. Through this process, the continued use of a health
reimbursement arrangement and minor changes to plan design, the Town was able to mitigate the majority of its
increase in health benefits costs and continue to offer Town employees’ health benefits at the Town’s expense.
The Accommodations Tax Fund continues to accumulate capital reserves for future beach nourishment needs. The
Restricted Accommodations Tax Cash account holds funds representing the 2% portion of the accommodations tax
rate that is restricted by legislation for the purposes of beach nourishment. The remaining funds in the
Accommodations Tax Cash account show those restricted for tourism activities from the 3% portion of the
accommodations taxes.
Business-Type Activities: The base sewer rates in the Town were increased by $5 per month for bills generated
August 1 and later to provide additional revenues for the FY 2012-2013 budget. The Sewer District Fee was
increased to $576 for the fiscal year. Rate increases were also passed for Solid Waste fees and other Town
enterprise activities per the Town’s fee schedule.
General-Other Council Actions/Information relative to FY 2011-2012:

Approved the Town’s Conditional Use Permit for Farmers’ Market.

Directed staff to send out an RFP for management of the Oak Island Par 3 at South Harbour.

Approved reduced wastewater connection fees for Ocean Crest Motel and Blue Water Point Motel.

Approved an Annexation Ordinance to extend the Corporate Limits of the Town of Oak Island for a mainland
voluntary annexation.

Approved Resolution Confirming Assessment Roll and Levying Assessments for Phase II Sewer Service Areas
9A of the Town of Oak Island Wastewater Project.

Approved purchase of two ambulances, fire truck and equipment; declared two vans, two ambulances and 20
other vehicles surplus.

Authorized Contract for Paving Project.

Approved five-year extension for permit for Midway Landing development; approved Conditional Use Permit for
Island Passage mainland commercial development and preliminary plat for 211 Midway subdivision.

Authorized expenditures toward dredging Lockwood Folly Inlet along with Holden Beach and Brunswick County.

Approved forwarding to NCDOT the Town’s only DOT priority of four-laning Midway Road.

Revised list of responsibilities for Capital Improvement Committee members.

Approved an agreement for secondary employment for police officers.

Approved financing a five-year loan at 1.97 percent for fire truck and two ambulances.

Accepted a $39,000 grant on behalf of the NC Marine Firefighting Council.

Approved participation in joint planning for the N.C. 211 corridor.

Approved request from NCDOT to accept Old Bridge Road into the Town’s street system.

Approved conservation easement for the Oak Island Pier to be held by the Oak Island Land Trust, LLC.

Approved three-year contract for legal services.

Approved a contract with the Oak Island Golf Course for treated wastewater and requested extension for
CWMTF grant.

Approved an ordinance amendment to require property owners to sign a non-conversion agreement for areas
below the lowest floor in VE flood zones.

Adopted ordinance amendment regarding concealed weapons on Town property.

Approved recommended response to citizen petition regarding wastewater system.

Approved lease for Alganomics (scientific research company operating at Fish Factory Road sewer plant).

Installed new elected officials.

Deleted position of Capital Project Coordinator.

Terminated employment contract of Town Manager, appointed Assistant Town Manager as Interim Town
Manager, hired an Interim Town Manager.

Approved acceptance of a repeater from Brunswick County, authorized purchase of six radios for fire
department.

Authorized Finance Officer to take appropriate action regarding sewer assessments on Town-owned properties.

Dropped appeal in Seidner vs. Oak Island case; authorized payment for the Seidners’ attorney fees during the
appeal.

Eliminated following positions: zoning administrator, urban forester, one code enforcement officer, assistant
manager.

Engaged Raftelis for an updated Financial Feasibility Evaluation (FFE) for the Town’s Wastewater System.

Approved transferring 911 communications to Brunswick County.

Approved reorganization in the Police and Fire Departments and Development Services.

Capped housing allowance for police officers with plan to consider it again in two years; reinstated take home
policy for police vehicles.
Requests for Information
This report is designed to provide an overview of the Town’s finances for those with an interest in this area.
Questions concerning any of the information found in this report or requests for additional information should be
directed to:
Steve Foster, Town Manager
Town of Oak Island
4601 E. Oak Island Drive
Oak Island, N.C. 28465
Bonnie Schwerd, Finance Director
Town of Oak Island
4601 E. Oak Island Drive
Oak Island, N.C. 28465
Phone (910) 278-5011
Fax (910) 278-3400
[email protected]
Phone (910) 278-5011
Fax (910) 278-3400
[email protected]
Basic Financial Statements
(This Page Was Intentionally Left Blank)
Town of Oak Island
June 30, 2012
Exhibit 1
Primary Government
Governmental
Activities
ASSETS
Cash and equivalents
Taxes receivable, net
Assessments receivable
Accrued interest receivable on taxes
Accounts receivable, net
Due from component unit
Inventories
Prepaid items
Restricted cash and cash equivalents
Restricted receivables
Accrued interest on restricted assets
Deferred charges
Capital Assets
Land, non-depreciable improvements,
and construction in progress
Other Capital Assets, net of
depreciation
Total Capital Assets
Total Assets
LIABILITIES
Accounts payable and accrued expense
Unearned revenue
Accrued interest payable
Customer deposits
Due to primary government
Claims and judgments
Payable from restricted assets
Long-term liabilities
Due within one year
Due in more than one year
Total liabilities
NET ASSETS
Invested in capital assets, net of related
debt
Restricted for:
Capital projects
Stabilization by State Statute
Streets
Public Safety
Tourism
Cultural and Recreation
Other purposes
Unrestricted
Total net assets
7,952,263
658,202
27,107
93,182
901,737
64,009
22,457
59,163
1,060,312
Businesstype Activities
3,662,564
-
Component Unit
Total
Oak Island
ABC Board
295,130
-
1,401,856
190,290
9,911,097
16,042,332
390,223
2,323,853
11,614,827
658,202
27,107
93,182
2,303,593
64,009
212,747
59,163
10,971,409
16,042,332
390,223
2,323,853
9,749,923
4,969,999
14,719,922
101,178
22,396,298
114,806,768
137,203,066
260,575
32,146,221
42,984,653
119,776,767
153,698,982
151,922,988
196,683,635
361,753
967,094
378,527
14,008
529,020
86,036
351,284
36,736
420,940
102,002
729,811
50,744
949,960
188,038
208,439
-
250,000
780,718
250,000
780,718
1,613,481
13,344,505
16,215,577
3,207,541
101,349,366
106,248,587
4,821,022
114,693,871
122,464,164
12,448
40,062
324,958
18,239,987
22,380,413
40,620,400
361,753
713,931
667,700
289,465
3,557,686
59,964
3,240,343
26,769,076
-
713,931
667,700
289,465
3,557,686
59,964
20,509,542
7,800,783
74,219,471
-
87
171,705
11,014
127,405
64,009
The accompanying notes are an integral part of the financial statements.
20,509,542
4,560,440
47,450,395
189,371
91,012
642,136
Town of Oak Island
Statement of Activities
Functions/Programs
Primary government
General Government
Public Safety
Transportation
Environmental Protection
Culture and Recreation
Interest on Long-term debt
Expenses
Charges for
Services
Program Revenue
Operating Grants
and
Contributions
Capital Grants
and
Contributions
2,736,737
5,466,506
2,596,254
226,484
1,264,990
600,751
245,924
1,447,452
271,142
145,861
-
310,842
292,979
65
26,021
-
1,081
14,026
266
863
-
Total governmental activities
12,891,722
2,110,379
629,907
16,236
Business-type activities
Water Operations
Wastewater Operations
Solid Waste Operations
Golf Course Operations
Total business-type activities
2,400,664
13,052,025
1,004,513
246,743
16,703,945
3,116,147
5,664,011
845,919
135,714
9,761,791
2,599
5,623
40,463
1,224
49,909
28,494
3,212,080
3,240,574
29,595,667
11,872,170
679,816
3,256,810
2,113,031
2,113,031
2,128,480
2,128,480
Total primary government
Component Unit
Oak Island ABC Board
Total component units
-
General revenues:
Taxes:
Property taxes, levied for general purposes
Local option sales tax
Accommodation Tax
Other taxes
Grants and contributions not restricted to specific programs
Unrestricted investment earnings
Miscellaneous
Total general revenues
Extraordinary item - pollution remediation costs
Transfers
Total general revenues, special items, and transfers
Change in net assets
Net assets - beginning
Net assets - ending
-
Exhibit 2
Net (Expense) Revenue and Changes in Net Assets
Primary Government
Governmental
Activities
Business-type
Activities
Total
(2,489,732)
(3,694,186)
(2,303,009)
45,586
(1,093,108)
(600,751)
(2,489,732)
(3,694,186)
(2,303,009)
45,586
(1,093,108)
(600,751)
(10,135,200)
(10,135,200)
(10,135,200)
746,576
(4,170,311)
(118,131)
(109,805)
(3,651,671)
746,576
(4,170,311)
(118,131)
(109,805)
(3,651,671)
(3,651,671)
(13,786,871)
Component Units
15,449
15,449
6,866,837
1,458,619
1,068,434
48,303
613,268
7,701
83,571
10,146,733
(33,081)
(127,000)
9,986,652
(148,548)
26,917,624
26,769,076
14,140
14,140
127,000
141,140
(3,510,531)
50,960,926
47,450,395
6,866,837
1,458,619
1,068,434
48,303
613,268
21,841
83,571
10,160,873
(33,081)
-
483
483
10,127,792
(3,659,079)
77,878,550
74,219,471
483
15,932
626,204
642,136
-
Exhibit 3
Page 1 of 2
Balance Sheet
Governmental Funds
June 30, 2012
Major Funds
General Fund
ASSETS
Cash and cash equivalents
Restricted cash
Receivables, net:
Taxes
Assessments
Accounts
Due from component unit
Receivable from other governments
Inventories
Prepaids
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Customer deposits
Deferred revenue
Unearned revenue
Total liabilities
Non-Major Funds
Other
Governmental
Funds
Total Governmental
Funds
4,210,213
667,700
3,742,050
392,612
7,952,263
1,060,312
658,202
25,702
661,575
64,009
11,849
22,457
3,000
6,405
223,313
56,163
658,202
32,107
884,888
64,009
11,849
22,457
59,163
6,324,707
4,420,543
10,745,250
293,068
86,036
726,754
14,008
85,459
378,527
86,036
733,159
14,008
1,119,866
91,864
1,211,730
56,163
22,457
59,163
289,465
3,501,523
59,964
713,931
667,700
289,465
3,501,523
59,964
420,784
780
425,139
420,784
780
-
6,405
Fund balances:
Non Spendable
Inventories
Prepaids
Restricted
Stabilization by State Statute
Streets
Public Safety
Tourism
Committed
Capital projects
Administration
Public Safety
Assigned
Unassigned
3,372,614
-
3,372,614
Total fund balances
5,204,841
4,328,679
9,533,520
Total liabilities and fund balances
6,324,707
4,420,543
10,745,250
22,457
3,000
713,931
667,700
-
425,139
The accompanying notes are an integral part of the financial statements
Town of Oak Island
Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets
June 30, 2012
Total fund balance, governmental funds
Exhibit 3
Page 2 of 2
9,533,520
Amounts reported for governmental activities in the Statement of Net Assets are
different because:
Capital assets used in governmental activities are not current financial resources and
therefore are not reported in this fund financial statement, but are reported in the
governmental activities of the Statement of Net Assets.
32,146,221
Certain other long-term assets are not available to pay current period expenditures and
therefore are not reported in this fund financial statement, but are reported in the
governmental activities of the Statement of Net Assets.
Accrued interest receivable from taxes
93,182
Liabilities for earned but deferred revenues in the fund statements
Some liabilities are not due and payable in the current period and are not included in
the fund financial statement, but are included in the governmental activities of the
Statement of Net Assets.
Installment notes payable
Capitalized lease contracts payable
Compensated absences payable
Other postemployment benefits payable
Claims and judgements payable
Net Assets of Governmental Activities in the Statement of Net Assets
733,159
(13,622,692)
(676,155)
(399,552)
(259,587)
(250,000)
(529,020)
(15,737,006)
26,769,076
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
Major Funds
General Fund
REVENUES
Ad valorem taxes
Other taxes and licenses
Unrestricted intergovernmental revenue
Restricted intergovernmental revenue
Permits and fees
Sales and services
Investment earnings
Miscellaneous
Total revenues
EXPENDITURES
Current:
General government
Public Safety
Transportation
Cultural and recreational
Debt Service:
Principal
Interest and other charges
Exhibit 4
Page 1 of 2
Non-Major Funds
Other
Governmental
Funds
Total
Governmental
Funds
6,735,314
1,502,980
613,268
1,645,733
293,638
613,350
4,638
264,820
1,068,434
71,568
5,157
15,932
6,735,314
2,571,414
613,268
1,717,301
293,638
613,350
9,795
280,752
11,673,741
1,161,091
12,834,832
2,450,088
5,407,442
2,445,600
211,712
907,836
115,795
112,181
162,764
2,565,883
5,519,623
2,445,600
211,712
1,070,600
1,642,697
655,200
-
1,642,697
655,200
Total Expenditures
13,720,575
390,740
14,111,315
Excess (deficiency) of revenues over expenditures
(2,046,834)
770,351
(1,276,483)
OTHER FINANCING SOURCES (USES)
Debt issued
Transfers in
Transfers out
318,000
360,078
-
(487,078)
318,000
360,078
(487,078)
Total other financing sources and uses
678,078
(487,078)
191,000
Net change in fund balances
(1,368,756)
283,273
(1,085,483)
Fund balances - beginning
6,573,597
4,045,406
10,619,003
Fund balances - ending
5,204,841
4,328,679
9,533,520
Town of Oak Island
Reconciliation of the Statement of Revenues, Expenditures, and Changes
In Fund Balances of Governmental Funds to the Statement of Activities
Net change in fund balances - total governmental funds:
Exhibit 4
Page 2 of 2
(1,085,483)
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Governmental funds report outlays for capital assets as expenditures because such outlays use
current financial resources. In contrast, the Statement of Activities reports only a portion of the
outlay as expense. The outlay is allocated over the assets' estimated useful lives as depreciation
expense for the period.
This is the amount by which capital outlays $745,806 are exceeded by depreciation $1,223,527 in
the current period.
Book value of assets sold
(477,721)
(6,454)
Governmental funds report the entire net sales price (proceeds) from sale of an asset as revenue
because it provides current financial resources. In contrast, the Statement of Activities reports only
the gain on the sale of the assets. Thus, the change in net assets differs from the change in fund
balance by the cost of the asset sold.
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds.
Current value of donated assets
Change in deferred revenue for tax and assessment revenues
Governmental funds report debt proceeds as current financial resources. In contrast, the Statement
of Activities treats such issuance of debt as a liability. Governmental funds report repayment of
debt principal as an expenditure, in contrast, the Statement of Activities treats such repayments as
a reduction in long-term liabilities. This is the amount by which proceeds exceeded repayments.
Debt proceeds
Debt repayments
Some expenses reported in the statement of activities do not require the use of current financial
resources and these are not reported as expenditures in governmental funds:
Accrued interest not reflected on Governmental funds
Compensated absences
Other postemployment benefits
Future environmental remediation costs
Change in net assets of governmental activities
140,045
(318,000)
1,642,697
54,449
(20,720)
(93,361)
16,000
(148,548)
Statement of Revenues, Expenditures and Changes in Fund Balance
Budget and Actual (with Variances)
General Fund
For the year ended June 30, 2012
Budgeted Amounts
Original
Final
REVENUES
Property taxes
Unrestricted intergovernmental revenues
Restricted intergovernmental revenues
Permits and fees
Sales and services
Investment earnings
Miscellaneous
Total revenues
EXPENDITURES
Current:
General government
Public safety
Transportation
Culture and recreation
Debt Service:
Principal
Interest and other charges
Contingency
Total Expenditures
Excess (deficiency) of revenues over
expenditures
Fund balance appropriated
Debt issued
Transfers in
Transfers out
Exhibit 5
Actual Amounts
Variance with
Final Budget Positive
(Negative)
6,613,505
1,357,000
587,000
1,422,553
252,500
660,730
5,000
126,950
6,702,505
1,357,000
587,000
1,606,901
252,500
664,354
5,000
213,793
6,735,314
1,502,980
613,268
1,645,733
293,638
613,350
4,166
264,820
32,809
145,980
26,268
38,832
41,138
(51,004)
(834)
51,027
11,025,238
11,389,053
11,673,269
284,216
3,133,264
5,419,978
2,705,918
257,000
991,885
2,620,009
5,602,960
2,553,766
257,000
981,391
2,450,088
5,407,442
2,445,600
211,712
907,836
169,921
195,518
108,166
45,288
73,555
1,644,560
672,234
-
1,644,570
672,244
-
1,642,697
655,200
-
1,873
17,044
-
14,824,839
14,331,940
13,720,575
611,365
(3,799,601)
(2,942,887)
(2,047,306)
895,581
1,888,199
340,000
1,496,402
75,000
1,929,285
340,000
673,602
-
318,000
360,078
-
(1,929,285)
(22,000)
(313,524)
-
3,799,601
2,942,887
678,078
(2,264,809)
-
-
(1,369,228)
(1,369,228)
Fund balance - beginning
6,148,930
Fund balance - ending
4,779,702
A legally budgeted Capital Reserve Fund is consolidated
into the General Fund for reporting purposes:
Interest Income
Fund balance, beginning
Fund balance - ending (Exhibit 4)
472
424,667
5,204,841
Proprietary Funds
June 30, 2012
Major Funds
Water Fund
ASSETS
Current assets:
Accounts Receivable, net
Other receivables
Inventories
Total current assets
Non-current assets:
Restricted Assets:
Assessments receivable, net
Sewer District Fees receivable, net
Accrued interest receivable
Deferred charges:
Bond issuance costs
Capital Assets:
Land and construction in progress
Other capital assets, net of depreciation
Capital assets
Total non-current assets
Total assets
LIABILITIES
Current Liabilities:
Accounts payable
Salaries payable
Unearned revenue
Customer deposits
Payable from restricted assets
Compensated absences payable, current
Installment notes payable, current
Revenue notes payable, current
Revenue bonds payable, current
Total current liabilities
Non-current liabilities:
Installment notes payable, noncurrent
Revenue notes payable, noncurrent
Revenue bonds payable, noncurrent
Total non-current liabilities
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for capital projects
Unrestricted
Total net assets
Exhibit 6
Non-Major Funds
Wastewater
Fund
Other Enterprise
Funds
Total
3,271,136
383,194
119,339
967,039
62,651
391,428
50,550
1,073
8,300
3,662,564
1,400,783
1,073
190,290
3,773,669
1,029,690
451,351
5,254,710
407,845
9,503,252
15,974,093
68,239
390,223
-
2,323,853
9,911,097
15,974,093
68,239
390,223
-
2,323,853
135,068
3,647,224
3,433,136
110,810,676
1,401,795
348,868
4,969,999
114,806,768
3,782,292
114,243,812
1,750,663
119,776,767
4,190,137
142,503,472
1,750,663
148,444,272
7,963,806
143,533,162
2,202,014
153,698,982
171,314
16,652
-
70,743
20,428
420,940
36,238
780,718
19,263
90,348
754,249
2,170,000
61,580
10,567
498
-
303,637
47,647
420,940
36,736
102,002
780,718
51,045
232,247
754,249
2,170,000
102,002
21,009
141,899
-
10,773
452,876
4,362,927
83,418
4,899,221
50,767
21,010
141,900
22,299
18,954
407,586
12,166,424
88,493,348
17,619
9,459
-
90,685
49,423
549,486
12,166,424
88,493,348
213,677
101,108,611
27,078
101,349,366
666,553
105,471,538
110,496
106,248,587
3,498,493
3,798,760
17,131,257
20,509,542
420,825
1,750,663
340,855
22,380,413
20,509,542
4,560,440
7,297,253
38,061,624
2,091,518
47,450,395
-
Statement of Revenues, Expenses and Changes in Fund Net Assets
Proprietary Funds
Major Funds
Water Fund
REVENUES
Other operating revenues
Exhibit 7
Non-Major Funds
Wastewater
Fund
Other Enterprise
Funds
Total
2,853,576
262,571
5,660,944
3,067
966,933
14,700
9,481,453
280,338
Total operating revenues
3,116,147
5,664,011
981,633
9,761,791
OPERATING EXPENSES
Administration
Water purchases
Waste collection and treatment
Maintenance
Depreciation
176,050
755,710
1,290,280
176,395
4,713,407
145,330
3,126,267
167,156
956,424
69,785
57,891
343,206
755,710
5,669,831
1,505,395
3,360,553
Total Operating Expenses
2,398,435
7,985,004
1,251,256
11,634,695
717,712
(2,320,993)
(269,623)
(1,872,904)
4,252
2,599
-
426
1,224
40,463
-
(2,229)
9,462
17,779
5,623
(4,968,863)
1,294,371
(98,158)
-
-
14,140
19,003
48,685
(4,968,863)
1,294,371
(98,158)
(2,229)
4,622
(3,739,786)
42,113
(3,693,051)
722,334
28,494
(291,314)
(6,060,779)
1,899,930
291,314
-
(227,510)
127,000
-
(5,565,955)
1,928,424
418,314
(291,314)
459,514
(3,869,535)
(100,510)
(3,510,531)
Total net assets - beginning
6,837,739
41,931,159
2,192,028
50,960,926
Total net assets - ending
7,297,253
38,061,624
2,091,518
47,450,395
Operating income (loss)
NON-OPERATING REVENUES
(EXPENSES)
Interest and investment revenue
Miscellaneous revenue
Interest expense
Interest on assessments
Bond issuance costs
Miscellaneous expenses
Total non-operating revenue (expenses)
Income (loss) before contributions and
transfers
Capital contributions
Transfers in
Transfers out
Exhibit 8
Page 1 of 2
Major Enterprise Funds
Water
Wastewater
Fund
Fund
Cash Flows From Operating Activities
Cash received from customers
Cash paid for goods and services
Cash paid to employees
Customer deposits received
Customer deposits returned
Other operating revenue
3,067
9,162,427
(6,991,346)
(1,160,813)
54,913
(34,174)
265,638
1,125,472
374,528
(203,355)
1,296,645
2,599
(291,314)
291,314
-
40,754
127,000
-
43,353
418,314
(291,314)
(288,715)
291,314
167,754
170,353
425,698
(679,624)
(141,899)
(29,534)
-
28,494
1,799,811
(5,753,431)
(1,585,248)
17,779
(4,982,729)
505,623
6,732,753
2,225,509
(6,462,589)
(1,727,147)
45,654
(4,982,729)
505,623
6,761,247
(339,456)
(3,265,442)
(29,534)
(3,634,432)
4,252
9,462
426
14,140
4,252
9,462
426
14,140
501,553
(2,590,138)
(64,709)
(2,153,294)
Beginning
3,177,428
12,093,390
454,913
15,725,731
Ending
3,678,981
9,503,252
390,204
13,572,437
Cash Flows From Noncapital Financing Activities
Operating grants received
Transfers-in
Transfers-out
Net cash provided by (used in) noncapital financing
activities
Cash Flows From Capital and Related Financing Activities
Debt proceeds
Acquisition and construction of capital assets
Principal paid on debt
Proceeds from sale of capital assets
Interest paid on debt
Capital contributions-State grant
Capital contributions-Brunswick County
Contributions from customers
Net cash used in capital and related financing
activities
Cash Flows Provided By Investing Activities
Interest earned
Net cash provided by investing activities
Net increase (decrease) in cash and cash equivalents
5,259,384
(4,495,066)
(392,857)
Total
985,124
(926,869)
(261,610)
-
Net cash provided by (used in) operating activities
2,917,919
(1,569,411)
(506,346)
54,913
(34,174)
262,571
Non-Major
Enterprise
Funds
27,875
Cash and cash equivalents:
(Continued)
Exhibit 8
Page 2 of 2
Major Enterprise Funds
Water
Wastewater
Fund
Fund
Non-Major
Enterprise
Funds
Total
Reconciliation of Operating Income (Loss) to Net Cash
Provided By (Used In) Operating Activities
717,712
(2,320,993)
(269,623)
(1,872,904)
176,395
3,126,267
57,891
3,360,553
64,343
76,810
(401,560)
5,937
3,310
228
(333,907)
82,975
49,001
20,739
(49,275)
-
(729)
(3,963)
9,701
14,734
2,753
(3,179)
14,578
181
(269)
(1,668)
7,324
(1,003)
20,739
181
(1,479)
4,854
36,636
407,760
2,695,521
66,268
3,169,549
1,125,472
374,528
(203,355)
1,296,645
Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:
Depreciation
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable
Inventory
Increase (decrease) in:
Accounts payable
Customer deposits
Unearned revenue
Accrued wages
Accrued vacation pay
Accrued OPEB liability
Total adjustments
Net cash provided by (used in) operating activities
Non-cash investing, capital and financiang activities:
Capital asset donations received
Total non-cash investing, capital and financing
activities:
465,543
465,543
-
465,543
-
465,543
Notes to Financial Statements
______________________________________________________________________________________________
Note 1. Summary of Significant Accounting Policies
The accounting policies of the Town of Oak Island, North Carolina (the “Town”) and its discretely presented
component unit conform to generally accepted accounting principles as applicable to governments. The following is
a summary of the more significant accounting policies:
A.
Reporting Entity
The Town is a municipal corporation that is governed by an elected mayor and a five-member Town Council. As
required by generally accepted accounting principles, these financial statements present the Town and its
component unit, a legally separate entity for which the Town is financially accountable. The discretely presented
component unit presented below is reported in a separate column in the Town’s financial statements in order to
emphasize that it is legally separate from the Town.
Town of Oak Island ABC Board (the “ABC Board”): The members of the ABC Board’s governing board are
appointed by the Town. In addition, the ABC Board is required by State statute to distribute its surpluses to the
General Fund of the Town. The ABC Board which has a June 30 year end is presented as if it were a
proprietary fund (discrete presentation). Complete financial statements for the ABC Board may be obtained from
the entity’s administrative offices at Oak Island ABC Board, 5402 East Oak Island Drive, Oak Island, NC 28465.
B.
Basis of Presentation
Government-wide statements: The statement of net assets and the statement of activities display information
about the primary government and its component unit. These statements include the financial activities of the overall
government. Eliminations have been made to minimize the double counting of internal activities. These
statements distinguish between the governmental and business-type activities of the Town. Governmental
activities generally are financed through taxes, intergovernmental revenues, and other non-exchange
transactions. Business-type activities are financed in whole or in part by fees charged to external parties.
The statement of activities presents a comparison between direct expenses and program revenues for the different
business-type activities of the Town and for each function of the Town’s governmental activities. Direct expenses
are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a
particular function. Indirect expense allocations that have been made in the funds have been reversed for the
statement of activities. Program revenues include (a) fees and charges paid by the recipients of goods or
services offered by the programs and (b) grants and contributions that are restricted to meeting the operational
or capital requirements of a particular program. Revenues that are not classified as program revenues, including all
taxes, are presented as general revenues.
Fund financial statements: The fund financial statements provide information about the Town’s funds. Separate
statements for each fund category – governmental, proprietary, and fiduciary - are presented. The emphasis of fund
financial statements is on major governmental and enterprise funds, each displayed in a separate column. All
remaining governmental and enterprise funds are aggregated and reported as non-major funds.
______________________________________________________________________________________________
Note 1.
Summary of Significant Accounting Policies (Continued)
B. Basis of Presentation (Continued)
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with the principal activity of the fund. Exchange transactions are those in which each party receives
and gives up essentially equal values. Non-operating revenues, such as subsidies result from non-exchange
transactions. Other non-operating revenues are ancillary activities such as investment earnings.
The Town reports the following major governmental fund:
General Fund - The General Fund is the general operating fund of the Town. The General Fund accounts for all
financial resources except those that are required to be accounted for in another fund. The primary revenue sources
are ad valorem taxes, State grants, and various other taxes and licenses. The primary expenditures are for public
safety, street maintenance and construction, and recreational facilities and programs. Additionally, the Town has
legally adopted Capital Reserve Fund. Under GASB 54 guidance this fund is consolidated in the General Fund.
The budgetary comparisons for the Capital Reserve Fund have been included in the supplemental information.
The Town reports the following non-major governmental funds:
Town Hall Replacement Capital Project – This fund is used to account for the construction of a new town hall.
Beach Preservation Special Revenue Fund - This fund is used to account for donations that are restricted
for publicizing and preserving the beach.
Emergency 911 System Fund – This fund is used to account for 911 revenues received by the State 911 Board to
enhance the State 911 system.
Accommodation Tax Special Revenue Fund - This fund is used to account for accommodation tax revenues that
are restricted for use for a particular purpose.
Police Department Headquarters Capital Project – This fund is used to account for the construction of the Police
Headquarters.
The Town reports the following major enterprise funds:
Water Fund - This fund is used to account for the Town’s water fund operations.
Wastewater Fund - This fund is used to account for the Town’s wastewater operations.
Wastewater Capital Project Fund – This fund is used to account for the extension of the wastewater system currently
located on the island.
______________________________________________________________________________________________
Note 1.
B. Basis of Presentation (continued)
The Town reports the following non-major enterprise funds:
Solid Waste Fund - This fund is used to account for the Town’s solid waste operations.
South Harbour Golf Course Fund – This fund is used to account for the Town’s maintenance and operation of the
golf course.
Sewer District Fee Fund – This fund is used to account for fees charged for the availability of sewer service. These
fees can only be used for payment of debt of the wastewater system.
The Town reports the following fund type:
Agency Fund – Agency funds are custodial in nature and do not involve the measurement of operating results. An
agency fund is used to account for assets the Town holds on behalf of others. The Town maintains the Fines and
Forfeitures Fund, which accounts for various legal fines and forfeitures that the Town is required to remit to the
Brunswick County Board of Education. At June 30, 2012, all funds had been disbursed, therefore, there is no
Statement of Net Assets for this fund presented in these financial statements.
C. Measurement Focus and Basis of Accounting
In accordance with North Carolina General Statutes, all funds of the Town are maintained during the year using
the modified accrual basis of accounting.
Government-wide, proprietary and fiduciary fund financial statements. The government-wide, proprietary,
and fiduciary fund financial statements are reported using the economic resources measurement focus. The
government-wide, proprietary, and fiduciary fund financial statements are reported using the accrual basis of
accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are
incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the Town
gives (or receives) value without directly receiving (or giving) equal value in exchange, include property
taxes, grants, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year
for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all
eligibility requirements have been satisfied.
Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or
privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including
special assessments. Internally dedicated resources are reported as general revenues rather than as program
revenues. Likewise, general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues
and expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund’s principal ongoing operations. The principal operating revenues of the Town enterprise funds are
______________________________________________________________________________________________
Note 1. Summary of Significant Accounting Policies (Continued)
C.
Measurement Focus and Basis of Accounting (Continued)
charges to customers for sales and services. The Town also recognizes as operating revenue the portion of tap fees
intended to recover the cost of connecting new customers to the water and sewer system after the systems are
completed. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses,
and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as
nonoperating revenues and expenses.
Governmental fund financial statements: Governmental funds are reported using the current financial
resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are
recognized when measurable and available. Expenditures are recorded when the related fund liability is incurred,
except for principal and interest on general long-term debt, claims and judgments, and compensated
absences, which are recognized as expenditures to the extent they have matured. General capital asset
acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and
acquisitions under capital leases are reported as other financing sources.
The Town considers all revenues available if they are collected within 90 days after year-end, except for property
taxes. Ad valorem taxes receivable are not accrued as revenue because the amount is not susceptible to
accrual. At June 30, taxes receivable are materially past due and are not considered to be an available resource to
finance the operations of the current year. Also, as of January 1, 1993, State law altered the procedures for the
assessment and collection of property taxes on registered motor vehicles in North Carolina. Effective with this
change in the law, Brunswick County is responsible for billing and collecting the property taxes on registered
motor vehicles on behalf of all municipalities and special tax districts in the County, including the Town of Oak
Island. For motor vehicles registered under the staggered system, property taxes are due the first day of the fourth
month after the vehicles are registered. The billed taxes are applicable to the fiscal year in which they become due.
Therefore, the Town’s vehicle taxes for vehicles registered in Brunswick County from March 2011 through February
2012 apply to the fiscal year ended June 30, 2012. Uncollected taxes that were billed during this period are shown as
a receivable in these financial statements and are offset by deferred revenues.
Sales taxes and certain intergovernmental revenues, such as the utilities franchise tax, collected and held by the
State at year-end on behalf of the Town are recognized as revenue. Intergovernmental revenues and sales and
services are not susceptible to accrual because generally they are not measurable until received in cash. Grant
revenues which are unearned at year-end are recorded as unearned revenues. Under the terms of grant
agreements the Town funds certain programs by a combination of specific cost-reimbursement grants, categorical
block grant and general revenues. Thus when program expenses are incurred, there are both restricted and
unrestricted net assets available to finance the program. It is the Town’s policy to first apply cost-reimbursement
grant resources to such programs, followed by categorical block grants, and then by general revenues.
As permitted by generally accepted accounting principles, the Town has elected to apply only applicable FASB
Statements and Interpretations issued on or before November 30, 1989 that do not contradict GASB pronouncements in
its accounting and reporting practices for its proprietary operations.
Note 1.
D.
Budgetary Data
The Town’s budgets are adopted as required by the North Carolina General Statutes. An annual budget is adopted
for the General Fund, Capital Reserve Fund, Accommodations Tax Fund, Emergency 911 Fund, Beach
Preservation Fund, Water Fund, Wastewater Fund, Solid Waste Fund, South Harbour Golf Course Fund
and Sewer District Fee Fund. All annual appropriations lapse at the fiscal year end. Project budget
ordinances are adopted for the Capital Projects funds. The Wastewater Capital Project and the Sewer
District Fee Fund are consolidated with the Wastewater Fund for reporting purposes. All budgets are
prepared using the modified accrual basis of accounting. Expenditures may not legally exceed
appropriations at the functional level for all annually budgeted funds and at the project level for the multiyear funds. The Town Manager is authorized to transfer appropriations within a fund as he sees
necessary; however, the governing board must approve any revisions that alter the total expenditures of
any fund or change functional appropriations by more than $1,000. The budget ordinance must be adopted
by July 1 of the fiscal year or the governing board must adopt an interim budget that covers the time until
the annual ordinance can be adopted.
E.
Assets, Liabilities and Fund Equity
Deposits and investments: All deposits of the Town and of the ABC Board are made in board-designated official
depositories and are secured as required by State law (G.S. 159-31). The Town and the ABC Board may
designate, as an official depository, any bank or savings association whose principal office is located in North Carolina.
Also, the Town and the ABC Board may establish time deposit accounts such as NOW and SuperNOW accounts,
money market accounts, and certificates of deposit.
State law (G.S. 159-30(c)) authorizes the Town and the ABC Board to invest in obligations of the United States or
obligations fully guaranteed both as to principal and interest by the United States; obligations of the State of
North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain
nonguaranteed federal agencies; certain high quality issues of commercial paper and bankers’ acceptances; and
the North Carolina Capital Management Trust (“NCCMT”). The securities of the NCCMT Cash Portfolio, a SECregistered (2a-7) money market mutual fund, are valued at fair value, which is the NCCMT’s share price.
Cash and cash equivalents: The Town pools money from several funds to facilitate disbursement and
investment and to maximize investment income. Therefore, all cash and investments are essentially demand
deposits and are considered cash and cash equivalents. The ABC Board considers all highly liquid investments
(including restricted assets) with maturity of three months or less when purchased to be cash and cash
equivalents.
Restricted assets: Certain proceeds of the Town’s enterprise fund revenue bonds, as well as certain resources set
aside for their repayment, are classified as restricted assets on the balance sheet because they are maintained in
separate bank accounts and their use is limited by applicable bond covenants. The “construction” account is used to
report those proceeds of revenue bond issuances that are restricted for use in construction. The “capitalized interest”
account is used to report resources set aside for paying interest on the respective bonds on such interest payment
date. In addition to the revenue bonds the Town has additional unexpended debt proceeds classified as restricted
assets because their use is completely restricted to the purpose of construction and acquisition of capital assets.
Customer deposits held by the Town before any services are supplied are restricted to the service for which the deposit
was collected. Powell Bill funds are also classified as restricted cash because it can be expended only for the
E.
Assets, Liabilities and Fund Equity (Continued)
purposes of maintaining, repairing, constructing, reconstructing or widening of local streets per NC G.S. 136-41.1
through 136-41.4.
Ad valorem taxes receivable: In accordance with State law (G.S. 105-347 and G.S. 159-13(a)), the Town levies ad
valorem taxes on property other than motor vehicles on July 1st, the beginning of the fiscal year. The taxes are
due on September 1st (lien date); however, interest does not accrue until the following January 6th. These taxes
are based on the assessed values as of January 1, 2011.
Allowances for doubtful accounts: All receivables that historically experience uncollectible accounts are shown net
of an allowance for doubtful accounts. This amount is estimated by analyzing the percentage of receivables that were
written off in prior years.
Inventory and Prepaid items: The inventories of the Town and the ABC Board are valued at cost (first-in, first-out),
which approximates market. The inventories of the Town’s general and enterprise funds consist of materials and
supplies held for subsequent use. The cost of these inventories is expensed when consumed rather than when
purchased. Inventory of the Town of Oak Island ABC Board consists of products for resale to customers. The
cost of these inventories is expensed when sold rather than when purchased.
Certain payments to vendors reflect costs applicable to future accounting principals and are recorded as prepaid items
in both government-wide and fund financial statements and expensed as the items are used.
Capital assets: Capital assets are defined by the government as assets with an initial, individual cost of more
than a certain cost and an estimated useful life in excess of two years. Minimum capitalization cost is $5,000.
Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated capital assets
are recorded at their estimated fair value at the date of donation. General infrastructure assets acquired prior to
July 1, 2003, consisting mainly of road networks, are not reported, because the Town is a Phase III town under
GASB 34, and not required to report those assets. The cost of normal maintenance and repairs that do not add to the
value of the asset or materially extend assets’ lives are not capitalized.
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Infrastructure
Utility systems I
Utility systems II
Buildings
Other structures and improvements
Motor vehicles
Computer and electric equipment
Office equipment
Equipment
Intangible assets
30
40
60
40
10 – 25
5
10
5
10
10
30
E.
Assets, Liabilities and Fund Equity (Continued)
Property, plant and equipment of the ABC Board are depreciated over their useful lives on a straight-line
basis as follows:
Assets Class
Buildings
Furniture and equipment
Paving
Estimated
Useful Lives
30 - 40
5 - 10
15
The Town and ABC Board evaluate prominent events or changes in circumstances affecting capital assets to
determine whether impairment of a capital asset has occurred. A capital asset is generally considered impaired if
both (a) the decline in service utility of the capital asset is large in magnitude and (b) the event or change in
circumstance is outside the normal life cycle of the capital asset. Impaired capital assets that will no longer be
used by the Town are reported at the lower of carrying value or fair value. Impairment losses on capital assets
that will continue to be used by the Town are measured using the method that best reflects the diminished service
utility of the capital asset. Any insurance recoveries received as a result of impairment events or changes in
circumstances resulting in the impairment of a capital asset are netted against the impairment loss.
Long-term obligations: In the government-wide financial statements, and proprietary fund types in the fund financial
statements, long-term debt and other long-term obligations are reported as liabilities in the applicable
governmental activities, business-type activities, or proprietary fund type statements of net assets. Bond
premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the
straight-line method that approximates the effective interest method. Bonds payable are reported net of the
applicable bond premiums or discount. Bond issuance costs are reported as deferred charges and amortized over
the term of the related debt.
In fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond
issuance costs, during the current period. The face amount of debt issued is reported as other financing
sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt
issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt
proceeds received, are reported as debt service expenditures.
Compensated absences: The vacation policy of both the Town and the ABC Board provides for the
accumulation of up to two hundred forty (240) hours earned vacation leave with such leave being fully vested
when earned. For the Town’s government-wide and proprietary funds, an expense and a liability for compensated
absences and the salary-related payments are recorded as the leave is earned. The Town has assumed a first-in,
first-out method of compiling accumulated compensated time. The portion of that time that is estimated to be
used in the next fiscal year has been designated as a current liability in the government-wide financial statements.
Both the Town and the ABC Board’s sick leave policies provide for an unlimited accumulation of earned sick leave.
Sick leave does not vest, but any unused sick leave accumulated at the time of retirement may be used in the
determination of length of service for retirement benefit purposes. Since neither the Town nor the ABC Board has
any obligation for the accumulated sick leave until it is actually taken, no accrual for sick leave has been made.
E. Assets, Liabilities and Fund Equity (Continued)
Net assets/fund-balances: Net assets in government-wide and proprietary fund financial statements are classified as
invested in capital assets, net of related debt; restricted; and unrestricted. Restricted net assets represent
constraints on resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations
of other governments or imposed by law through state statute.
Fund Balances
In the governmental fund financial statements, fund balance is composed of five classifications designed to
disclose the hierarchy of constraints placed on how fund balances can be spent.
The governmental fund types classify fund balance as follows:
Non Spendable Fund Balance – This classification includes amounts that cannot be spent because they are either
(a) not in spendable form or (b) legally or contractually required to be maintained intact.
Inventories – portion of fund balance that is not an available resource because it represents the year-end
balance of ending inventories, which are not spendable resources.
Prepaids – portion of fund balance that is not an available resource because it represents the year-end
balance of ending prepaids, which are not spendable resources.
Restricted Fund Balance – This classification includes amounts that are restricted to specific purposes externally
imposed by creditors or imposed by law.
Restricted for Stabilization by State statute - portion of fund balance that is restricted by State Statute [G.S.
159-8(a)].
Restricted for Streets - Powell Bill portion of fund balance that is restricted by revenue source for street
construction and maintenance expenditures. This amount represents the balance of the total unexpended
Powell Bill funds.
Restricted for Public Safety - portion of fund balance that is restricted by revenue source for certain emergency
telephone system expenditures.
Restricted for Tourism - portion of fund balance that is restricted by revenue source for certain tourism related
purposes. This amount represents the balance of the unexpended accommodations tax receipts.
Restricted for Cultural and Recreation – portion of fund balance that is restricted by revenue source for certain
cultural and recreation related purposes. This amount represents the balance of funds restricted by donors for
beach preservation.
Committed Fund Balance – portion of fund balance that can only be used for specific purposes imposed by majority
by quorum of Town of Oak Island’s governing body (highest level of decision making authority). Any changes or
removal of specific purpose requires majority action by the governing body.
______________________________________________________________________________________________
E. Assets, Liabilities and Fund Equity (Continued)
Committed for Capital Projects – portion of fund balance committed by Town Council for certain capital project
related purposes. This amount represents the balance in the legally budgeted capital reserve fund.
Committed for Administration – portion of fund balance committed by Town Council for the town hall
replacement. This amount represents the balance remaining in the Town Hall Replacement Capital Project
Fund.
Committed for Public Safety – portion of fund balance committed by Town Council for the police
headquarters project. This amount represents the balance remaining in the Police Headquarters Capital
Project Fund
Assigned fund balance – portion of fund balance that the Town of Oak Island intends to use for specific purposes.
Subsequent year’s expenditures – portion of fund balance that is appropriated in the next year’s budget that is
not already classified in restricted or committed. The governing body approves the appropriation; however the
budget ordinance authorizes the manager to modify the appropriations by resource or appropriation within
funds up to $1,000.
Unassigned fund balance – the portion of fund balance that has not been restricted, committed or assigned to
specific purposes or other funds.
The Town of Oak Island has a revenue spending policy that provides guidance for programs with multiple revenue
sources. The Finance Officer will use resources in the following hierarchy: bond proceeds, federal funds, State
funds, local non-town funds, Town funds. For purposes of fund balance classification expenditures are to be spent
from restricted fund balance first, followed by in-order by committed fund balance, assigned fund balance and lastly
unassigned fund balance. The Finance Officer has the authority to deviate from this policy if it is in the best interest
of the Town.
Note 2. Stewardship, Compliance and Accountability
A.
Deficit Balance in Wastewater Capital Project
The Wastewater Capital Project Fund ended the year with a negative fund balance. The negative balance was caused
by funds being expended in one period and anticipated loan funds being received in later periods. Anticipated loan
funds are not now available. These balances will be covered with transfers and advances from other funds until
revenues in the Wastewater fund are adequate or additional loan funds are available.
______________________________________________________________________________________________
Note 2. Stewardship, Compliance and Accountability (Continued)
B. Expenditures Exceed Appropriations
At June 30, 2012, expenditures in the Wastewater Capital Project exceeded budget appropriations. This overexpenditure is the result of costs for the project exceeding expected funds available for construction. Management
will review status of contracts, future change orders and possible sources of funds to make sure appropriations are
adequate in the future.
Note 3. Deposits and Investments
Deposits: All the deposits of the Town and the ABC Board are either insured or collateralized by using one of two
methods. Under the Dedicated Method, all deposits that exceed the federal depository insurance coverage level are
collateralized with securities held by the Town’s or the ABC Board’s agents in these units’ names. Under the Pooling
Method, which is a collateral pool, all uninsured deposits are collateralized with securities held by the State
Treasurer’s agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity
for the Town and the ABC Board, these deposits are considered to be held by the Town’s and the ABC Board’s
agents in their names. The amount of the pledged collateral is based on an approved averaging method for
noninterest bearing deposits and the actual current balance for interest-bearing deposits. Depositories using the
Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured
deposits. The State Treasurer does not confirm this information with the Town, the ABC Board, or the escrow
agent. Because of the inability to measure the exact amounts of collateral pledged for the Town or the ABC
Board under the Pooling Method, the potential exists for under-collateralization, and this risk may increase in
periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial
stability for each depository that collateralizes public deposits under the Pooling Method. The Town and the ABC
Board have no policy regarding custodial credit risk for deposits, but rely on the State Treasurer to enforce
standards of minimum capitalization for all pooling method financial institutions and to monitor them for compliance.
The Town complies with the provisions of G.S. 159-31 when designating official depositories and verifying that
deposits are properly secured.
At June 30, 2012, the Town’s deposits had a carrying amount of $15,686,204 and a bank balance of
$15,795,189. The carrying amount of deposits of the ABC Board was $421,035 and the bank balance was
$372,458. Deposits in the amount of $4,075,877 of the Town and $250,000 of the ABC Board were covered by
federal depository insurance. The balances of the deposits $11,719,312 for the Town and $122,458 for the ABC
Board were collateralized for institutions using the Pooling Method. At June 30, 2012, the Town’s petty cash
fund totaled $910 and the ABC Board’s cash on hand totaled $1,500.
Investments: At June 30, 2012, the Town had $6,899,122 invested in the North Carolina Capital
Management Trust’s Cash Portfolio which carried a credit rating of AAAm by Standard and Poor’s. The Town has no
formal policy regarding credit risk.
______________________________________________________________________________________________
Note 4. Receivable - Allowances for Doubtful Accounts
The amounts presented in the balance sheet and the statement of net assets is net of the following allowances for
doubtful accounts:
General Fund:
Taxes receivable
Storm water fees receivable
74,244
1,929
76,173
Enterprise Funds:
Water Fund
264,559
Wastewater Fund:
Wastewater billing
Sewer district fees
Sewer assessments
53,341
125,901
840,742
Solid Waste Fund
75,590
1,360,133
1,436.306
Note 5.
Capital Assets
Primary government:
Capital asset activity for the primary government for the year ended June 30, 2012 was as follows:
6/30/11
Beginning
Balances
Governmental Activities:
Capital assets not being depreciated
Land
Contruction in progress
Total capital assets not being
depreciated
Capital assets being depreciated
Buildings
Motor vehicles
Equipment
Office Equipment
Other structures/improvements
Computers/electrical equipment
Infrastructure
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Motor vehicles
Equipment
Office Equipment
Other structures/improvements
Computers/electrical equipment
Infrastructure
Total accumulated depreciation
Total capital assets being
depreciated, net
Governmental activity capital assets, net
9,499,923
250,000
66,714
9,749,923
66,714
16,962,917
1,707,597
2,463,536
1,407,235
169,486
2,919,673
909,546
3,728,410
30,268,400
66,619
168,024
325,348
60,641
10,958
27,578
19,924
1,594,925
1,398,857
1,726,131
894,372
54,416
796,679
589,119
333,428
7,387,927
428,910
150,054
143,200
89,925
16,254
153,345
117,559
124,280
1,223,527
22,880,473
32,630,396
(544,435)
(477,721)
Depreciation expense was charged to functions of the primary government as follows:
General Government
Public Safety
Transportation
Cultural and recreational
Total depreciation expense
Increases
227,656
598,555
143,144
12,580
241,592
1,223,527
679,092
Decreases
Transfers
-
361,320
52,242
13,000
6/30/12
Ending
Balances
(66,714)
9,499,923
250,000
(66,714)
9,749,923
25,876
25,208
17,055,412
1,539,509
2,736,642
1,460,876
180,444
2,947,251
964,308
3,728,410
30,612,852
6,000
34,838
426,562
91,922
358,006
49,102
13,000
25,208
420,108
25,208
2,023,835
1,216,113
1,820,229
971,297
70,670
950,024
706,678
457,708
8,216,554
6,454
6,454
66,714
-
22,396,298
32,146,221
Note 5.
Capital Assets (continued)
6/30/11
Beginning
Balances
Business type activities:
Water Fund
Land
Buildings
Motor vehicles
Equipment
Utility systems I
Utility systems III
Buildings
Motor vehicles
Equipment
Utility systems I
Utility systems II
depreciated, net
Water fund capital assets, net
Decreases
Transfers
135,068
135,068
127,016
339,009
365,744
93,727
2,028,136
3,870,546
6,824,178
679,624
679,624
65,771
284,090
217,479
59,211
956,531
2,066,997
3,650,079
1,808
29,960
22,548
9,509
44,495
68,075
176,395
3,174,099
3,309,167
503,229
503,229
Wastewater Fund
Land
Future Treatment rights
Construction in progress
Total capital assets not being depreciated
3,147,739
285,397
3,433,136
Capital assets being depreciated:
Buildings
Motor vehicles
Heavy vehicles
Equipment
Utility systems I
Utility systems II
Intangible assets
13,266,014
153,278
180,711
7,213,807
27,067
82,466,182
10,651,633
113,958,692
Buildings
Motor vehicles
Heavy vehicles
Equipment
Utility systems I
Utility systems II
Intangible assets
depreciated, net
Wastewater fund capital assets, net
Increases
6/30/12
Ending
Balances
-
127,016
306,705
323,244
93,727
2,028,136
4,550,170
7,428,998
44,700
-
67,579
281,746
227,631
68,720
1,001,026
2,135,072
3,781,774
30,104
30,104
-
3,647,224
3,782,292
32,304
42,500
2,527,906
2,527,906
74,804
32,304
12,396
-
(2,527,906)
(2,527,906)
(25,208)
18,000
1,218,102
1,309,804
2,502,698
18,000
(25,208)
18,000
(25,208)
504,168
96,885
173,181
1,310,540
8,995
3,853,418
421,026
6,368,213
2,527,906
-
110,810,676
114,243,812
649,331
172,518
121,148
155,110
605,612
8,318
2,192,860
29,588
3,285,154
331,650
18,945
18,071
704,928
677
1,660,558
391,438
3,126,267
110,673,538
114,106,674
(2,390,768)
137,138
13,266,014
110,070
180,711
7,299,975
27,067
84,333,615
11,961,437
117,178,889
18,000
86,168
735,499
3,147,739
285,397
3,433,136
-
Note 5.
Capital Assets (continued)
6/30/11
Beginning
Balances
Solid Waste Fund
Buildings
Motor vehicles
Heavy vehicles
Buildings
Motor vehicles
Heavy vehicles
depreciated, net
Sold Waste fund capital assets, net
5,304
53,350
688,417
747,071
Increases
Decreases
6/30/12
Ending
Balances
Transfers
-
5,304
82,884
688,417
776,605
1,603
53,350
491,747
546,700
29,534
29,534
1,470
53,350
443,791
498,611
133
47,956
48,089
-
248,460
248,460
(18,555)
(18,555)
-
-
-
1,401,795
1,401,795
-
-
98,205
73,471
171,676
-
229,905
229,905
South Harbor Golf Course Fund
Land
Total capital assets not being depreciated
1,401,795
1,401,795
Buildings
Equipment
Infrastructure
98,205
73,471
171,676
-
8,593
34,318
42,911
2,455
7,347
9,802
-
-
11,048
41,665
52,713
128,765
1,530,560
(9,802)
(9,802)
-
-
118,963
1,520,758
119,194,861
612,010
30,104
-
119,776,767
Buildings
Equipment
depreciated, net
SHGC fund capital assets, net
Business-type activities capital assets, net
Depreciation expense was charged to proprietary functions of the primary government as follows:
Water Fund
Wastewater Fund
Solid Waste Fund
South Harbour Golf Course Fund
Total depreciation expense
176,395
3,126,267
48,089
9,802
3,360,553
______________________________________________________________________________________________
Note 5. Capital Assets (continued)
At June 30, 2012 all construction projects are “substantially complete”. However, the Town is withholding final
payments on two projects until Town officials and the contractors can complete a final inspection and agree that all
work has been completed to satisfy the terms of the contract. The withheld balances are as follows:
Remaining
Retainage
Project
Police Headquaters Capital Project
Wastewater Capital Project
76,506
780,718
857,224
Discretely presented component unit
Activity for the ABC Board for the year ended June 30, 2012 was as follows:
Beginning
Balances
Land
Buildings
Paving
330,523
92,370
15,000
437,893
Buildings
Paving
Total capital assets being depreciated, net
ABC Board capital assets, net
83,315
70,110
10,083
163,508
274,385
375,563
101,178
Increases
______
_____
8,264
4,546
1,000
13,810
Decreases
______
______
Ending
Balances
101,178
330,523
92,370
15,000
437,893
91,579
74,656
11,083
177,318
260,575
361,753
______________________________________________________________________________________________
Note 6.
Pension Plan Obligations
Local Governmental Employees’ Retirement System
Plan description: The Town of Oak Island and the ABC Board contribute to the statewide Local Governmental
Employees’ Retirement System (“LGERS”), a cost-sharing multiple-employer defined benefit pension plan
administered by the State of North Carolina. LGERS provides retirement and disability benefits to plan members and
beneficiaries. Article 3 of G.S. Chapter 128 assigns the authority to establish and amend benefit provisions to the
North Carolina General Assembly. The Local Governmental Employees’ Retirement System is included in the
Comprehensive Annual Financial Report (“CAFR”) for the State of North Carolina. The State’s CAFR includes
financial statements and required supplementary information for LGERS. That report may be obtained by writing
to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or by calling
(919) 981-5454.
Funding policy: Plan members are required to contribute six percent of their annual covered salary. The Town
and the ABC Board are required to contribute at an actuarially determined rate. For the Town, the current rate
for employees not engaged in law enforcement and for law enforcement officers is 6.88% and 6.90%, respectively,
of annual covered payroll. For the ABC Board, the current rate for employees not engaged in law enforcement is
6.88% of annual covered payroll. The contribution requirements of members and of the Town of Oak Island and
the ABC Board are established and may be amended by the North Carolina General Assembly. The Town’s
contributions to the LGERS for the years ended June 30, 2012, 2011 and 2010 were $406,414, $390,440, and
$292,394, respectively. The ABC Board’s contributions to LGERS for the years ended June 30, 2012, 2011 and
2010 were $10,918, $9,594 and $6,689, respectively. The contributions made by the Town and the ABC
Board equaled the required contribution for each year.
Law Enforcement Officers’ Special Separation Allowance
1.
Plan Description
The Town of Oak Island administers a public employee retirement system (the “Separation Allowance”), a
single-employer defined benefit pension plan that provides retirement benefits to the Town’s qualified sworn law
enforcement officers. The Separation Allowance is equal to .85 percent of the annual equivalent of the base rate of
compensation most recently applicable to the officer for each year of creditable service. The retirement benefits are
not subject to any increases in salary or retirement allowances that may be authorized by the General
Assembly. Article 12D of G.S. Chapter 143 assigns the authority to establish and amend benefit provisions to the
North Carolina General Assembly.
All full-time law enforcement officers of the Town are covered by the separation allowance. At
December 31, 2011, the Separation Allowance’s membership consisted of:
Retirees receiving benefits
Terminated plan members entitled to but not yet
Receiving benefits
Active plan members
Total
3
0
25
28
______________________________________________________________________________________________
Note 6.
Pension Plan Obligations (Continued)
Law Enforcement Officers’ Special Separation Allowance (Continued)
A separate report was not issued for the plan.
2. Summary of Significant Accounting Policies
Basis of accounting - The Town has chosen to fund the Separation Allowance on a pay-as-you-go basis. Pension
expenditures are made from the General Fund, which is maintained on the modified accrual basis of accounting.
Method used to value investments - No funds are set aside to pay benefits and administration costs. These
expenditures are paid as they come due.
3. Contributions
The Town is required by Article 12D of G.S. Chapter 143 to provide these retirement benefits and has chosen to
fund the benefit payments on a pay-as-you-go basis through appropriations made in the General Fund
operating budget. The Town’s obligation to contribute to this plan is established and may be amended by the North
Carolina General Assembly. There were no contributions made by employees.
The annual required contribution for the current year was determined as part of the December 31, 2011
actuarial valuation using the projected unit credit actuarial cost method. The actuarial assumptions included (a)
5.00% investment rate of return (net of administrative expenses) and (b) projected salary increases of 4.25% 7.85% per year. Both (a) and (b) included an inflation component of 3.00%. The assumptions did not include
post-employment benefit increases.
Annual pension cost and net pension obligation. The Town’s annual pension cost and net pension obligation
to the Separation Allowance for the current year were as follows:
Annual required contribution
46,933
Interest on net pension obligation
(810)
Adjustment to annual required contribution
966
Annual pension cost
47,089
Contributions made
47,089
Increase (decrease) in net pension obligation
0
Net pension obligation beginning of year
0
Net pension obligation end of year
0
Year Ended
June 30
2010
2011
2012
3 Year Trend Information
Annual Pension
Cost APC
63,399
45,836
47,089
Percentage of
APC Contributed
81.88%
100.00%
100.00%
Net Pension
Obligation
0
0
0
______________________________________________________________________________________________
Note 6. Pension Plan Obligations (Continued)
4. Funded Status and Funding Progress
As of December 31, 2011, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued
liability for benefits and the unfunded actuarial accrued liability (UAAL) was $427,131. The covered payroll (annual
payroll of active employees covered by the plan) was $1,220,744 and the ratio of the UAAL to the covered payroll
was 34.99 percent.
The schedule of funding progress, presented as required supplementary information following the notes to the
financial statements, presents multiyear trend information about whether the actuarial value of plan assets are
increasing or decreasing over time relative to the actuarial accrued liability for benefits.
Supplemental Retirement Income Plan
Plan description: The Town contributes to the Supplemental Retirement Income Plan (Plan), a defined contribution
pension plan administered by the Department of State Treasurer and a Board of Trustees. The Plan provides
retirement benefits to law enforcement officers employed by the Town. Article 5 of G.S. Chapter 135 assigns the
authority to establish and amend benefit provisions to the North Carolina General Assembly. The Supplemental
Retirement Income Plan for Law Enforcement Officers is included in the Comprehensive Annual Financial Report
(CAFR) for the State of North Carolina. The State’s CAFR includes the pension trust fund financial statements for
the Internal Revenue Code Section 401(k) plan that includes the Supplemental Retirement Income Plan for Law
Enforcement Officers. That report may be obtained by writing to the Office of the State Controller, 1410 Mail
Service Center, Raleigh, North Carolina 27699-1410, or by calling (919) 981-5454.
Funding policy: Article 12E of G.S. Chapter 143 requires the Town to contribute each month an amount equal to five
percent of each officer’s salary, and all amounts contributed are vested immediately. Also, the law enforcement
officers may make voluntary contributions to the Plan. In addition, the Town has elected to contribute four
percent for all employees not engaged in law enforcement to the Supplemental Retirement Income Plan.
Total contributions for the year ended June 30, 2012 were $391,388, which consisted of $247,749 from the
Town and $143,639 from the employees.
Firemen’s and Rescue Squad Workers’ Pension Fund
Plan description: The State of North Carolina contributes, on behalf of the Town of Oak Island, to the Firemen’s and
Rescue Squad Workers’ Pension Fund, a cost-sharing multiple-employer defined benefit pension plan with a special
funding situation administered by the State of North Carolina. The fund provides pension benefits for eligible fire and
rescue squad workers that have elected to become members of the fund. Article 86 of G.S. Chapter 58 assigns the
authority to establish and amend benefit provisions to the North Carolina General Assembly. The Firemen’s
and Rescue Squad Workers’ Pension Fund is included in the Comprehensive Annual Financial Report (CAFR) for
the State of North Carolina. The State’s CAFR includes financial statements and required supplementary
information for the Firemen’s and Rescue Squad Worker’s Pension Fund. That report may be obtained by writing
to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or by
calling (919) 981-5454.
Funding policy: The Town contributes $10 per month to the Fund for members. The State, a nonemployer
contributor, funds the plan through appropriations. Contribution requirements of plan members and the State of
North Carolina are established and may be amended by the North Carolina General Assembly.
______________________________________________________________________________________________
Note 7. Other Employment and Post-Employment Benefits
Healthcare Benefits
Plan Description. Under the terms of a Town resolution, the Town administers a single-employer defined benefit
Healthcare Benefits Plan (the HCB Plan). The HCB Plan provides postretirement health and dental care benefits to
retirees of the Town who meet the following requirements:
(1)
An employee who has a minimum of fifteen years in the North Carolina Local Governmental Employees
Retirement System (“NCLGERS”), and a minimum of five years service to the Town, and are fifty-five years
of age or older may continue health insurance with the Town until age sixty-five. The retiree shall share the
cost of coverage at the rate of 5% for every year of service to the NCLGERS below twenty-five years.
Medicare supplemental insurance shall be offered to retirees sixty-five or older who meet the above criteria
with all costs being borne by the retiree. Continuation of coverage for the retiree’s spouse or family may be
allowed until the retiree reaches age sixty-five, provided all costs are borne by the retiree.
(2)
An employee retiring from the Town of Oak Island who has a minimum of twenty-five years in the
NCLGERS, a minimum five years service with the Town and who is fifty years of age or older, may continue
health insurance coverage with the Town until age sixty-five at no cost to the retiree. Medicare
supplemental insurance shall be offered to retirees sixty-five or older who meet the above criteria with all
costs being borne by the retiree. Continuation of coverage for the retiree’s spouse or family shall be
available until the retiree reaches age sixty-five, provided all costs are borne by the retiree.
(3)
An employee retiring from the Town of Oak Island who has five continuous years of service with the
Town, and thirty continuous years of service to the NCLGERS, regardless of age, may continue health
insurance coverage with the Town until age sixty-five at no cost to the retiree. Medicare supplemental
insurance shall be available for retirees who meet these criteria and are sixty-five or older with all costs being
borne by the retiree. Continuation of coverage for the retiree’s spouse or family may be allowed until the
retiree reaches age sixty-five, provided all costs are borne by the retiree.
Under either of the above, service with the Town of Long Beach or Town of Yaupon Beach will qualify as service to
the Town of Oak Island. The Town Council may amend the benefit provisions. A separate report was not issued for
the plan.
Membership in the HCB Plan consisted of the following at December 31, 2011, the date of the latest actuarial
valuation:
Law enforcement officers
General Employees
Retirees
25
118
9
Total
152
______________________________________________________________________________________________
Note 7. Other Employment and Post-Employment Benefits (Continued)
Funding Policy. The Town has chosen to fund the healthcare benefits on a pay as you go basis. The current annual
required contribution (ARC) is 3.03% of annual covered payroll. For the current year, the Town contributed $65,992
or 1.07% of annual covered payroll. The Town obtains healthcare coverage through private insurers. Five retired
employees contributed a portion of the cost of their insurance totaling $4,391. The Town’s obligation to contribute to
the HCB Plan is established and may be amended by the Town Council.
Summary of Significant Accounting Policies. Postemployment expenditures are made from the fund from which the
retiree was employed. Currently all retirees are from the General Fund, which is maintained on the modified accrual
basis of accounting. No funds are set aside to pay benefits and administration costs. These expenditures are paid
as they come due.
Annual OPEB Cost and Net OPEB Obligation. The Town’s annual OPEB Cost (expense) is calculated based on the
annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the
parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis is
projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a
period not to exceed thirty years. The following table shows the components of the Town’s annual OPEB cost for the
year, the amount actually contributed to the plan, and changes in the Town’s net OPEB obligation for the healthcare
benefits:
Annual require contribution
Interest on net OPEB obligation
Adjustment to annual required contribution
Annual OPEB cost
Contributions made
Increase (decrease) in net OPEB obligation
Net OPEB obligation, beginning of year
Net OPEB obligation, end of year
194,780
8,811
(7,602)
195,989
(65,992)
129,997
220,275
350,272
The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB
obligation as of June 30, 2012 were as follows:
For Year Ended
June 30
2010
2011
2012
Annual
OPEB Cost
180,954
181,482
195,989
% of Annual OPEB
Cost Contributed
46.9%
31.6%
33.7%
Net OPEB
Obligation
96,150
220,275
350,272
______________________________________________________________________________________________
Note 7. Other Employment and Post-Employment Benefits (Continued)
Funding Status and Funding Progress. As of December 31, 2011, the most recent actuarial valuation date, the plan
was not funded. The actuarial accrued liability for benefits and, thus, the unfunded actuarial accrued liability was
$1,851,682. The covered payroll (annual payroll of active employees covered by the plan) was $6,123,242, and the
ratio of the UAAL to the covered payroll was 30.2 percent. Actuarial valuations of an ongoing plan involve estimates
of the value of reported amounts and assumptions about the probability of occurrence of events far into the future.
Examples include assumptions about future employment, mortality, and healthcare trends. Amounts determined
regarding the funded status of the plan and the annual required contributions of the employer are subject to continual
revision as actual results are compared with past expectations and new estimates are made about the future. The
schedule of funding progress, presented as required supplementary information following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liabilities for benefits.
Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits
provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and
plan members at that point. The actuarial methods and assumptions used include techniques that are designed to
reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent
with the long-term perspective of the calculations.
In the December 31, 2011 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial
assumptions included a 4.0 percent investment rate of return (net of administrative expenses), which is the expected
long-term investment returns on the employer’s own investments calculated based on the funded level of the plan at
the valuation date, and an annual medical cost trend increase of 9.50 to 5.00 percent annually. The investment rate
included a 3.00 percent inflation assumption. The assumed investment rate of return reflects that no assets are set
aside within the Town that is legally held exclusively for retiree health benefits. The UAAL is being amortized as a
level percentage of projected payroll on an open basis. The remaining amortization period at December 31, 2011,
was 30 years.
Other Employment Benefits
The Town has elected to provide death benefits to employees through the Death Benefit Plan for members of the
Local Governmental Employees’ Retirement System (Death Benefit Plan), a multiple-employer, Stateadministered, cost-sharing plan funded on a one-year term cost basis. The beneficiaries of those employees who die in
active service after one year of contributing membership in the System, or who die within 180 days after retirement or
termination of service and have at least one year of contributing membership service in the System at the time of death
are eligible for death benefits. Lump-sum death benefit payments to beneficiaries are equal to the employee’s 12
highest month’s salary in a row during the 24 months prior to the employee’s death, but the benefit may not exceed
$50,000 or be less than $25,000. All death benefit payments are made from the Death Benefit Plan. The Town has
no liability beyond the payment of monthly contributions. Contributions are determined as a percentage of monthly
payrolls, based upon rates established annually by the State. Separate rates are set for employees not engaged in
law enforcement and for law enforcement officers. Because the benefit payments are made by the Death Benefit Plan
and not by the Town, the Town does not determine the number of eligible participants. For the fiscal year ended
June 30, 2012, the Town made contributions to the State for death benefits of $6,369. The Town’s required
contributions for employees not engaged in law enforcement and for law enforcement officers represented .10% and
.14% of covered payroll, respectively. The contributions to the Death Benefit Plan cannot be separated between the
post-employment benefit amount and the other benefit amount.
______________________________________________________________________________________________
Note 8.
Deferred Revenue/Unearned Revenue
The balance in deferred/unearned revenue at year-end is composed of the following elements:
Deferred
Revenue
General Fund:
Prepaid taxes
Prepaid privilege licenses
Taxes receivable
Privilege licenses receivable
Assessments receivable
Nonmajor governmental funds:
Assessment receivable
Unearned
Revenue
4,118
9,890
658,202
42,850
25,702
726,754
14,008
6,405
733,159
14,008
Proprietary Funds:
Wastewater Fund
Prepaid assessment
Nonmajor proprietary funds
Unredeemed gift cards
36,238
0
498
36,736
Note 9. Risk Management
The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors
and omissions; injuries to employees; and natural disasters. The Town participates in two self-funded risk-financing
pools administered by the North Carolina League of Municipalities. Through these pools, the Town obtains general
liability, auto liability coverage of $2 million per occurrence, property coverage up to the total insurance values of the
property policy, workers’ compensation coverage up to the statutory limits. The pools are reinsured through commercial
companies for single occurrence claims against general liability, auto liability and property liability in excess of $500,000
and $300,000 statutory limits for workers’ compensation. The property liability pool has an aggregate limit of the total
property losses in a single year, with the reinsurance limit based upon a percentage of the total insurance values.
The Town provides health, dental, vision and life insurance through a commercial vendor. Employee health claims are
insured to a $5 million dollar lifetime limit. Employees can provide dependent coverage if desired.
The Town carries commercial coverage for all other risks of loss. There have been no significant reductions in insurance
coverage in the prior year, and settled claims have not exceeded coverage in any of the past three fiscal years.
The Town carries flood insurance through the National Flood Insurance Program (“NFIP”) for three buildings. All
three buildings were required to obtain flood insurance as part of their installment purchase agreement. The Town
does not feel that additional flood insurance is necessary because the danger of flooding as defined by the insurance
companies is low.
______________________________________________________________________________________________
Note 9. Risk Management (Continued)
In accordance with G.S.159-29 the Town’s employees that have access to $100 or more at any given time of the
Town’s funds are performance bonded through a commercial surety bond. The finance officer and tax collector are
each individually bonded for $100,000 and $50,000, respectively. The remaining employees that have access to
funds are bonded under a blanket bond for $50,000.
The Town of Oak Island ABC Board is exposed to various risks of loss related to torts; theft of, damage to, and
destruction of assets; errors and omissions; and natural disasters. The ABC Board has property, general liability,
auto liability, workers’ compensation, and employee health coverage. The ABC Board also has liquor legal liability
coverage. There have been no significant reductions in insurance coverage in the past year, and settled claims have
not exceeded coverage in any of the past three fiscal years.
Note 10. Claims, Judgments and Contingent Liabilities
At June 30, 2012, the Town was a defendant to various claims and lawsuits. In the opinion of the Town’s
management and the Town Attorney, only the following items have more than a remote chance of having a
material adverse effect on the Town’s financial position:
Construction Systems, Inc. (“CSI”) v. Town of Oak Island. This is a pending claim asserted by the General
Contractor for the storm water system for the Town Hall / Police Department complex. CSI contends that it is
owed $427,408 for work performed as a result of modifications to the original design of the storm water system.
This claim is subject to mandatory arbitration; however, a demand for arbitration has not been made. The Town
has denied this claim on the advice of the Town’s architect. It is the opinion of the Town Attorney that the upper
limits of the Town’s exposure would be $250,000.
In the government-wide financial statements the Town has recorded a liability of $250,000 in the Governmental
Activities for the CSI claim.
Note 11. Long-Term Obligations
Capital leases: The Town has entered into agreements to lease certain equipment. The lease agreements qualify
as capital leases for accounting purposes and, therefore, have been recorded at the present value of the
future minimum lease payments as of the date of their inception. In all agreements, title passes to the Town at
the end of the lease term. The provisions of the capital leases are summarized below:
Date of
Lease
Fund
Property Leased
Total of
Payment
Remaining
Frequency
Lease
Amount
Payments
of Payment
3/25/2005 General Fund
2005 Emergency One Pumper Fire Truck
272,000
32,525
3
Annual
2008 Rosenburgh Fire Truck
675,000
84,186
8
Annual
Town Hall Telephone System
80,000
17,950
2
Annual
Caterpillar Motor Grader
88,000
18,491
3
Annual
2 New Ambulances and Used Fire Truck
318,000
65,105
4
Annual
____________________________________________________________________________________________
Note 11. Long-Term Obligations (Continued)
The following is an analysis of the assets recorded under capital leases at June 30, 2012:
Fund
General Fund
General Fund
General Fund
Class of Property
Computers/Electrical Equip
Equipment
Cost
Accumulated
Depreciation
Net Book
Value
76,351
118,000
1,295,382
1,489,733
62,354
21,633
432,237
516,224
13,997
96,367
863,145
973,509
The future minimum lease obligations and the net present value of these minimum lease payments
as of June 30, 2012 were as follows:
Year Ending June 30
2012
2013
2014
2015
2016
2017 – 2021
Total minimum lease payments
Less: amount representing interest
Present value of the minimum lease payments
219,258
219,258
201,275
150,291
84,187
252,559
1,126,828
145,782
981,046
Installment purchases: The Town has entered into various installment purchase contracts to finance the
acquisition and renovation of various land and facilities. These installment purchase contracts are outlined as
follows:
General Fund
Installment purchase for construction of police headquarters from BB&T dated May 15, 2008, due in annual
principal installments of $266,667 plus interest of 3.89% through July 2021.
Installment purchase for construction of fire stations at Yaupon Beach and South Harbour from BB&T
dated May 15, 2008 due in annual principal installments of $408,643 plus interest of 3.93% through July
2022.
Installment purchase contract for additional financing for construction of police headquarters from BB&T
dated August 14, 2008, due in annual principal installments of $127,940 plus interest of 4.44% through
August 2021.
Installment purchase contract for Yaupon Pier purchase and repair from BB&T dated June 17, 2009, due
in annual principal installments of $90,000 plus interest of 4.39% through June 2019.
____________________________________________________________________________________________
Installment purchase contract for construction of town hall from BB&T dated May 13, 2009, due in annual
principal installments of $326,667 plus interest of 4.59% through July 2024.
Wastewater Fund
Installment purchase contract for land purchase for future sewer expansion from BB&T dated May 30, 2002,
due in annual installments of $114,597 including interest of 4.87% through May 2017.
Water Fund
Installment obligation to NC Department of Transportation for relocation of water lines during construction of
new bridge to the island dated April 25, 2012, due in annual installments of $141,900 with no interest through
April 2014.
The future minimum payments of the installment purchases as of June 30, 2012, including $3,493,033
of interest are as follows:
Year Ending June 30
2013
2014
2015
2016
2017
2018 – 2022
2023 – 2025
Total
Governmental
Activities__
__
Principal
Interest
1,219,916
1,219,916
1,219,916
1,219,916
1,219,916
5,829,579
1,388,641
13,317,800
559,774
508,715
457,657
406,598
355,540
1,023,674
106,024
3,417,982
Business-Type
_____ Activities_______
Principal
Interest
232,247
236,648
99,362
104,201
109,275
584,086
24,249
19,849
15,235
10,396
5,322
75,051
Revolving Loans
In January 2008, the Town entered into a $9,000,000 revolving loan from the North Carolina Department of
Environment and Natural Resources for a sanitary sewer project. The revolving loan requires bi-annual interest
payments due on November 1 and May 1 and an annual principal payment due on May 1; interest is a 2.10%. Through
June 30, 2012 the Town had drawn $7,525,146. The period for withdrawals has expired and there will be no future
withdrawals.
Additionally, in March 2009, the Town was approved for a second revolving loan from the North Carolina Department
of Environment and Natural Resources in the amount of $8,500,000 for a sanitary sewer project. The revolving loan
requires biannual interest payments due on November 1 and May 1 and an annual principal payment due on May 1;
interest is at 2.48%. Through June 30, 2012 the Town had drawn $6,579,167. The period for withdrawals has expired
and there will be no future withdrawals.
______________________________________________________________________________________________
Current annual debt service requirement to maturity for the revolving loans are as follows:
Year Ending June 30
2013
2014
2015
2016
2017
2018-2022
2023-2026
Thereafter
Principal
Interest
596,276
287,605
609,822
274,058
623,679
260,201
637,853
246,027
652,351
231,529
3,491,112
928,290
3,906,725
512,678
87,873
2,086,908
12,604,726 2,828,261
Revenue Debt
On August 1, 1993, the Town of Yaupon Beach received a $3,159,476 loan from the North Carolina Water Pollution
Revolving Fund. The Town of Oak Island assumed the balance of $2,369,607 owed on July 1, 1999. The proceeds
of this debt were used to finance a wastewater treatment system. Solely the revenues produced by the wastewater
treatment system collateralize this note. Principal payments are due annually on November 1 through November 1,
2014 with semiannual interest payments due on May 1 and November 1 at an annual interest rate of 3.57%.
Annual debt service requirements to maturity for revenue indebtedness in the Wastewater Fund are as follows:
Principal
Interest
Year Ending June 30
2013
2014
157,973
157,974
315,947
11,279
5,640
16,919
Revenue Bonds
$33,040,000 Enterprise System Bonds, series 2008A, net of $561,329 issuance
premium, issued for wastewater system improvements. Principal installments are due
annually on June 1 with semiannual interest payments due on December 1 and June 1,
at an annual interest rate of 3.50% - 5.00%.
31,260,902
$49,420,000 Enterprise System Bonds, series 2009, net of $413,472 issuance discount
issued for wastewater system improvements. Principal installments are due annually on
June 1 with semiannual interest payments due on December 1 and June 1, at an
annual interest rate of 4.00% to 6.00%.
49,055,993
______________________________________________________________________________________________
$10,670,000 Enterprise System Bonds, series 2011, net of $77,888 issuance discount
issued for wastewater system improvements. Principal installments are due annually on
June 1 with semiannual interest payments due on December 1 and June 1, at an
annual interest rate of 2.25% to 5.75%.
10,346,453
90,663,348
Annual debt service requirements to maturity for the revenue bonds are as follows:
Year Ending June 30
2013
2014
2015
2016
2017
2018 - 2022
2023 - 2027
Thereafter
Principal
Interest
2,172,190
2,262,190
2.352,190
2,447,190
2,547,190
14,505,949
18,390,949
45,985,500
90,663,348
4,666,481
4,583,506
4,487,356
4,393,881
4,298,931
19,705,919
15,812,438
13,339,250
71,287,762
______________________________________________________________________________________________
The Town has been in compliance with the covenants as to rates, fees, rentals and charges in Section 704 of the Bond
Order, authorizing the issuance of the Enterprise System Bonds, Series 2008A, 2009 and 2011. Section 704(a) of the
Bond Order requires the sum of (i) Income available for debt service for such fiscal year and (ii) 15% of the balance in
the Revenue Fund as of the last day of the preceding fiscal year will not be less than the sum of (1) 120% of the longterm debt service requirement for parity indebtedness for such fiscal year and (2) 100% of the long-term debt service
requirement for subordinated indebtedness, System G.O. indebtedness and System Other indebtedness for such fiscal
year. Section 704(b) requires Income available for debt service for such fiscal year will not be less than 100% of the
long-term debt service requirement for parity indebtedness, subordinated indebtedness, System G.O. indebtedness
and System Other indebtedness for such fiscal year. The debt service coverage calculation for the year ended June
30, 2012, is as follows:
Operating and non operating revenues
Sewer district fee
Sewer assessment revenue
10,088,243
496,361
4,250,000
Total revenues*
Current expenses**
14,834,604
7,080,777
Income available for debt service
15% of the balance of the revenue fund
Total
100% of the long-term debt service requirement for parity indebtedness,
subordinated indebtedness, system g.o. indebtedness and system
other indebtedness for 2013
Additional 20% of the long-term debt service requirement for parity
indebtedness for 2013
Total
7,753,827
568,061
8,321,888
6,709,876
1,144,668
7,854,544
Coverage test 704(a)
1.06
Coverage test 704(b)
1.16
*In accordance with the Revenue Bond trust agreement assessment revenues shall be included in revenues if and to
the extent specified in the Officer’s Certificate filed in such fiscal year. In the current year $4,250,000 in assessment
revenue was included.
**Per rate covenants, this does not include depreciation expense of $3,302,662.
The Town has pledged future water and wastewater customer revenues, net of specified current expenses, to repay
$90,663,348 in water and wastewater system revenue bonds issued in January 2008, March 2009 and January 2011.
Proceeds from the bonds provided financing for the extension to the wastewater system to the entire island. The
bonds are payable solely from water and wastewater income available for debt service and are payable through 2036.
The total principal and interest remaining to be paid on the bonds, net of the issuance premium, is $161,951,110.
Principal and interest paid for the current year was $6,453,380.
______________________________________________________________________________________________
At June 30, 2012, the Town of Oak Island had a legal debt margin of $184,950,897.
Changes in long-term liabilities:
A summary of changes in long-term debt is as follows:
Beginning
Installment Purchase
Balance
Increases
14,777,318
Decreases
Ending
Current
Balance
Portion
1,459,518
13,317,800
1,219,916
Capitalized leases
846,226
318,000
183,180
981,046
182,787
378,832
277,572
256,852
399,552
210,778
166,227
159,353
65,992
259,588
47,089
47,089
16,168,603
802,014
2,012,631
14,957,986
1,613,481
584,086
425,698
228,051
781,733
232,247
11,116,037
1,799,811
311,122
12,604,726
596,276
Net pension obligation
-
-
-
Business-type Activities
Installment purchases
State revolving loan
Revenue debt
Revenue bonds
473,921
157,974
315,947
157,973
91,695,537
1,032,189
90,663,348
2,170,000
54,049
36,636
108,032
51,087
104,031,662
2,313,232
90,685
-
58,651
100,468
51,045
1,787,987
104,556,907
3,207,541
Compensated absences for government activities have typically been liquidated in the General Fund.
______________________________________________________________________________________________
Note 12. Interfund Balances and Activity
Transfers to/from other funds at June 30, 2012, consist of the following:
Transfer to
Non-Major
Transfer from
Non-Major Governmental Funds
Water Fund
Totals
General
Wastewater
Enterprise
Fund
Fund
Funds
360,078
Totals
127,000
487,078
-
291,314
-
291,314
360,078
291,314
127,000
778,392
Interfund transfers were made during the year to accumulate resources for funding of capital projects and to
supplement other funding sources in the Capital Projects, Special Revenue, Wastewater, Solid Waste and South
Harbour Golf Course funds.
Note 13.
On-Behalf Payments for Fringe Benefits and Salaries
For the fiscal year ended June 30, 2012, the Town of Oak Island has recognized on-behalf payments for pension
contributions made by the state as a revenue and expenditure of $10,318 for the 11 volunteer firemen and the 16
employed firemen who perform firefighting duties for the Town’s fire department. The volunteers and employees
elected to be members of the Firemen and Rescue Worker’s Pension Fund, a cost sharing, multiple employer public
employee retirement system established and administered by the State of North Carolina. The plan is funded by a
$10 monthly contribution for each member, investment income and a State appropriation.
Also, the Town has recognized as a revenue and an expenditure, on-behalf payments for fringe benefits and
salaries of $3,000 for the salary supplement and stipend benefits paid to eligible firemen by the local board of
trustees of the Firemen’s Relief Fund during the fiscal year ended June 30, 2012. Under State law the local board
of trustees for the Fund receives an amount each year, which the board may use at its own discretion for eligible
firemen or their departments.
______________________________________________________________________________________________
Note 14. Fund Balance
The following schedule provides management and citizens with information on the portion of General fund balance that
is available for
appropriation:
Total fund balance - General Fund
5,204,841
Less:
Inventories
Prepaids
Stabalization by State Statute
Streets- Powell Bill
Capital Projects
Remaining Fund Balance
22,457
3,000
713,931
667,700
425,139
3,372,614
The outstanding encumbrances are amounts needed to pay any commitments related to purchase orders and
contracts that remain unperformed at year-end. At June 30, 2012, the General Fund had encumbrances totaling
$19,348 and the Non-Major Funds had $9,245 in encumbrances.
Note 15. Joint Ventures
The Town and the members of the Town’s fire department each appoint two members to the five-member local board
of trustees for the Firemen’s Relief Fund. The State Insurance Commissioner appoints one additional member to the
local board of trustees. The Firemen’s Relief Fund is funded by a portion of the fire and lightening insurance
premiums that insurers remit to the State. The State passes these moneys to the local board of the Firemen’s
Relief Fund. The funds are used to assist fire fighters in various ways. The Town obtains an ongoing financial
benefit from the Fund on-behalf of payments for salaries and fringe benefits made to members of the Town’s fire
department by the board of trustees. During the fiscal year ended June 30, 2012, the Town reported $3,000 in revenues
and expenditures for the payments made through the Firemen’s Relief Fund. The participating governments do not
have any equity interest in the joint venture, so no equity has been reflected in the Town’s financial statements at
June 30, 2012. The Firemen’s Relief Fund does not issue separate audited financial statements. Instead, the local
board of trustees files an annual financial report with the State Firemen’s Association. This report can be obtained
from the Association at 323 West Jones Street, Suite 401, Raleigh, North Carolina 27603.
Note 16. Jointly Governed Organizations
Cape Fear Council of Governments: The Town, in conjunction with four counties and forty other municipalities
established the Cape Fear Council of Governments (“Council”). The participating governments established the
Council to coordinate various funding received from federal and State agencies. Each participating government
appoints one member to the Council’s governing board. The Town paid membership fees of $1,757 to the Council
during the fiscal year ended June 30, 2012. Complete financial information for the Council can be obtained from the
Council’s administrative offices at 1480 Harbour Drive, Wilmington, NC 28401.
Note 16. Jointly Governed Organizations (Continued)
Brunswick County Airport Commission: The Town in conjunction with Brunswick County and the City of Southport
established the Brunswick County Airport Commission. The purpose of the Commission is to acquire land, establish,
construct, own, control, lease, equip, improve, maintain, operate, and regulate airports or landing fields within the
County, to provide and maintain an airport facility for the use of the general aviation public and to promote the
economic development of Brunswick County. The Town of Oak Island appoints two members and the City of
Southport appoints one member to the Commission while Brunswick County appoints a total of four. The Town is not
obligated to furnish any funds to the Commission but in the past has made contributions. During the year ended
June 30, 2012, the Town contributed $7,500 to the Commission. The participating governments do not have any
equity interest in the Commission, so no equity interest has been reflected in the Town’s financial statements at
June 30, 2012. Complete financial information for the Airport Commission can be obtained at the airport’s
administrative offices at 380 Long Beach Road, Southport, NC 28461.
West Brunswick Regional Water Reclamation Facility
The Facility is owned, operated and maintained by Brunswick County. The Town of Oak Island, Town of Holden Beach,
Town of Shallotte and the County have entered into a wastewater service agreement for a portion of the treatment
capacity in the plant. Currently the Town of Oak Island is allocated treatment of three million gallons per day. Each
participant is charged capacity service fees based on their share of capacity in the plant. Participants are also charged
treatment service fees based on metered flow they send to the plant. The participant fees and the costs allocation to the
County for their flow are combined so that the operating and maintenance costs of the plant are recovered by county
retail revenues and participant service fees on a proportional and breakeven basis. Each participant has the ability to
appoint one representative and one alternate to an Oversight Committee. This committee makes budget and operating
recommendations to the County Commissioners. During the year ended June 30, 2012, the Town of Oak Island
recorded $3,090,366 in capacity fees and $458,003 in service fees to Brunswick County.
Note 17. Summary Disclosure of Significant Contingencies
Federal and state assisted programs: The Town has received proceeds from several federal and State grants.
Periodic audits of these grants are required and certain costs may be questioned as not being appropriate
expenditures under the grant agreements. Such audits could result in the refund of grant moneys to the grantor
agencies. Management believes that any required refunds will be immaterial. No provision has been made in the
accompanying financial statements for the refund of grant moneys.
Note 18. Subsequent Events
Events occurring after June 30, 2012 were evaluated by management on May 28, 2013 to ensure that any
subsequent events that met the criteria for recognition and or disclosure in these financial statements have been
included. The following event meets the criteria for disclosure.
Violation of Revenue Bond Filing Requirements
The Annual Secondary Market Filing (Rule 15c2-12) as required by the continuing disclosure of Town bond
documents were not filed by the January 31, 2013 deadline. Failure to file timely is a breach of the contract which
was signed when the debt was issued. The Town will ensure that the required filings will be timely in the future.
Required Supplemental Financial Data
Required Supplementary Information
Law Enforcement Officer's Special Seperation Allowance- Schedule of Funding Progress
June 30, 2012
Actuarial Valuation Date
December 31:
1999
$
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Actuarial
Accrued
Liability
Projected Unit
Credit
Actuarial
Value of
Assets
-
$
137,986 $
190,934
212,480
268,781
278,926
369,658
322,470
298,853
391,206
376,725
439,890
414,197
427,131
Unfunded
Actuarial
Accrued
Liability
137,986
190,934
212,480
268,781
278,926
369,658
322,470
298,853
391,206
376,725
439,890
414,197
427,131
Funded
Ratio
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Covered
Payroll
%$
624,267
833,443
848,902
836,623
792,942
780,787
918,365
994,570
1,011,832
1,073,205
1,129,298
1,139,599
1,220,744
Exhibit A-1
Unfunded
Actuarial
Accrued
Liability as a
Percent of
Covered
Payroll
22.10
22.91
25.03
32.13
35.18
47.34
35.11
30.05
38.66
35.10
38.95
36.35
34.99
%
Exhibit A-2
Law Enforcement Officer's Special Seperation Allowance- Schedule of Employer Contributions
June 30, 2012
Year Ended June 30,
Annual Required Contribution
Percent Contributed
18,634
22,755
24,648
29,916
34,761
32,482
31,352
37,884
37,997
38,565
45,841
46,933
68.90
73.07
67.47
55.59
146.19
156.44
182.58
159.25
154.68
134.61
99.99
84.71
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Notes to Required Supplementary Information
The information presented in the required supplementary schedules was determined as part of the actuarial valuations at
the dates indicated. Additional information as of the latest actuarial valuation follows:
Valuation date
Actuarial cost method
Amortization method
Remaining amortization method
Asset valuation method
Actuarial assumptions:
Investment rate of return*
Projected salary increases*
*Includes inflation at
Cost of living adjustments
Since the previous valuation, the assumed interest rate has not changed.
December 31, 2011
Projected unit credit
Level percent of pay closed
19 years
Market Value
5.00%
4.25-7.85%
3.00%
N/A
Other Postemployment Benefits - Schedule of Funding Progress
June 30, 2012
Actuarial Valuation Date
December 31:
2008
$
2011
$
Actuarial
Accrued
Liability
Projected Unit
Credit
Actuarial
Value of
Assets
-
$
$
1,813,586 $
1,851,682 $
Unfunded
Actuarial
Accrued
Liability
1,813,586
1,851,682
Funded
Ratio
0.00
0.00
Exhibit A-3
Covered
Payroll
%$
%$
5,555,994
6,123,242
Unfunded
Actuarial
Accrued
Liability as a
Percent of
Covered
Payroll
32.60
30.20
%
%
Other Postemployment Benefits - Schedule of Employer Contributions
June 30, 2012
Year Ended June 30,
2010
2011
2012
Exhibit A-4
Annual Required Contribution
Percent Contributed
180,954
181,482
195,989
46.90
31.60
33.70
Notes to Required Supplementary Information
The information presented in the required supplementary schedules was determined as part of the actuarial valuations at
the dates indicated. Additional information as of the latest actuarial valuation follows:
Valuation date
Actuarial cost method
Amortization method
Remaining amortization method
Asset valuation method
Actuarial assumptions:
Investment rate of return*
Medical cost trend rate
Year of Ultimate trend rate
*Includes inflation at
December 31, 2011
Projected unit credit
Level percent of pay, open
30 years
Market Value of Assets
4.00%
9.50%-5.00%
2018
3.00%
Individual Fund Statements and Schedules
Governmental Funds
General Fund
Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual
Final
Budgeted
Amounts
Revenue:
Ad valorem taxes:
Current year
Prior years
Motor vehicle tax
Actual
Exhibit B-1
1 of 8
Variance
With Final
Budget
6,397,505
164,000
110,000
6,391,741
177,948
122,961
(5,764)
13,948
12,961
31,000
42,664
11,664
6,702,505
6,735,314
32,809
520,000
287,000
264,000
260,000
20,000
568,800
314,776
288,931
286,112
36,018
48,800
27,776
24,931
26,112
16,018
6,000
8,343
2,343
1,357,000
1,502,980
145,980
28,000
409,000
32,000
29,593
381,608
33,779
1,593
(27,392)
1,779
Video franchise fees
18,000
19,322
1,322
ABC profit distribution
100,000
148,966
48,966
587,000
613,268
26,268
17,850
154,553
122,698
3,441
950,000
33,000
-
17,850
145,319
120,449
5,687
997,196
36,000
13,318
(9,234)
(2,249)
2,246
47,196
3,000
13,318
Penalties and interest
Total ad valorem taxes
Local option sales tax:
1%
1/2%, 40
1/2%, 42
1/2%, 44
Privilege licenses
Animal control
Total other taxes and licenses
Unrestricted intergovernmental revenue:
Beer and wine tax
Utility franchise tax
Telephone communication tax
Total unrestricted intergovernmental revenue
Restricted intergovernmental revenue:
FEMA reimbursement
FEMA SAFR grant
FEMA AFF grant
NC control substance tax distribution
Brunswick County fire district fees
Brunswick County rescue contract
On-behalf of payments - Fire and Rescue
General Fund
Final
Budgeted
Amounts
DHS - Marine Fire Equipment and Training Grant
State Street Aid allocation
Federal Drug Seizure Law Enforcement
Total restricted intergovernmental revenue
Permits and fees:
Planning board fees
Homeowners Recovery Fund
Building permits
Other permits and fees
Inspection fees
CAMA reimbursement
Total permits and fees
Sales and services:
Recreation department fees
Salty Dog Park Revenue
Stormwater fees, residential
Stormwater fees, commercial
Rescue Squad fees
Sponsorship ads
Weight room fees
Merchandising
Video programing revenue
Lease, Southern Bell
Total sales and services
Investment earnings
Miscellaneous:
Street assessments
Underground utility assessments
Sale of fixed assets
Actual
Exhibit B-1
2 of 8
Variance
With Final
Budget
39,000
285,000
1,359
13,940
292,979
2,995
(25,060)
7,979
1,636
1,606,901
1,645,733
38,832
1,000
500
115,000
88,000
45,000
3,000
600
640
154,098
78,165
54,560
5,575
(400)
140
39,098
(9,835)
9,560
2,575
252,500
293,638
41,138
75,000
3,624
235,000
22,000
98,630
7,000
35,000
4,000
181,700
2,400
83,515
7,674
236,236
24,075
58,362
2,670
37,514
2,960
157,944
2,400
8,515
4,050
1,236
2,075
(40,268)
(4,330)
2,514
(1,040)
(23,756)
-
664,354
613,350
(51,004)
5,000
4,166
(834)
-
1,138
2,604
44,568
1,138
2,604
44,568
General Fund
Final
Budgeted
Amounts
Pier lease
Beach & Tourism Committee Programs
Pier preservation revenues
Tree preservation revenues
Sponsorship- Oak Island Fireworks
Donations
Brunswick Arts Council
Miscellaneous
Stormwater Program Fees
Civil citations
Turtle program
Interest on assessments
Total miscellaneous
Total revenue
Expenditures:
General government:
Governing body:
Salaries
Fringe benefits
Operating expense
Elections
Donations:
Brunswick Family Assistance
Chamber of Commerce
Oak Island Senior Citizens
Communities in Schools
Hope Harbor Home
Family Emergency Teen Shelter
Kay Beasley Sea Turtle Hospital
NC Fourth of July Festival
Oak Island Community Watch
Lower Cape Fear Hospice
Oak Island Art Guild
Actual
Exhibit B-1
3 of 8
Variance
With Final
Budget
72,750
10,000
10,000
10,000
12,195
1,000
84,148
10,000
3,700
-
66,750
9,356
3,575
9,891
104,749
100
13,344
7,617
1,128
(6,000)
9,356
(10,000)
(10,000)
(6,425)
(2,304)
(1,000)
20,601
100
3,344
3,917
1,128
213,793
264,820
51,027
11,389,053
11,673,269
284,216
34,464
2,624
359,855
3,170
34,464
2,177
299,989
3,161
1,000
5,500
6,032
1,000
1,800
1,200
1,000
1,000
2,000
2,500
500
1,000
5,500
6,032
1,000
1,800
1,200
1,000
2,000
2,500
500
General Fund
Final
Budgeted
Amounts
Brunswick County Literacy Council
Long Bay Artificial Reef Association
Oak Island Feral Cat Program
Brunswick County Airport Commission
Actual
Exhibit B-1
4 of 8
Variance
With Final
Budget
1,500
5,000
2,000
7,500
1,500
5,000
2,000
7,500
439,645
378,323
Administration:
Salaries
Fringe benefits
Operating expenditures
Capital outlay
575,912
221,689
542,034
20,200
560,940
215,603
501,855
10,958
Total administration
1,359,835
1,289,356
Grounds maintenance:
Salaries
Fringe benefits
194,164
93,613
53,498
186,801
89,867
45,637
341,275
322,305
57,551
45,571
376,132
57,347
41,520
361,237
479,254
460,104
19,150
2,620,009
2,450,088
169,921
1,212,675
513,237
1,206,750
495,771
Total governing body
Total grounds maintenance
Facilities management:
Salaries
Fringe benefits
Total facilities management
Total general government
Public safety:
Police:
Salaries
Fringe benefits
61,322
70,479
18,970
General Fund
Final
Budgeted
Amounts
Capital outlay
Actual
Exhibit B-1
5 of 8
Variance
With Final
Budget
198,877
143,862
176,711
143,855
2,068,651
2,023,087
207,055
101,401
14,950
200,102
83,817
7,852
Total emergency communications
323,406
291,771
31,635
Fire and EMS Department:
Salaries
Fringe benefits
Contracted services - Yaupon Beach VFD
Capital outlay
980,107
355,345
515,021
80,000
410,642
978,803
361,662
420,788
80,000
417,989
-
2,341,115
2,259,242
81,873
485,328
197,866
64,992
477,686
196,803
42,230
748,186
716,719
Animal control:
Salaries
Fringe benefits
73,198
32,784
15,620
73,188
30,484
12,951
Total animal control
121,602
116,623
4,979
5,602,960
5,407,442
195,518
Total police
Emergency communications:
Salaries
Fringe benefits
Total Fire and EMS Department
Development services:
Salaries
Fringe benefits
Total development services
Total public safety
45,564
31,467
General Fund
Final
Budgeted
Amounts
Transportation:
Administration, public works:
Salaries
Fringe benefits
Actual
Exhibit B-1
6 of 8
Variance
With Final
Budget
211,768
78,340
11,850
210,844
69,735
8,279
301,958
288,858
251,009
106,287
1,713,481
243,537
101,443
1,651,098
2,070,777
1,996,078
82,698
40,619
57,714
76,312
38,321
46,031
181,031
160,664
20,367
Total transportation
2,553,766
2,445,600
108,166
Environmental protection:
Stormwater:
Salaries
Fringe benefits
70,308
20,318
166,374
67,422
19,881
124,409
257,000
211,712
Total administration, public works
Street repair and construction:
Salaries
Fringe benefits
Total street repair and construction
Fleet maintenance:
Salaries
Fringe benefits
Total fleet maintenance
Total environmental protection
13,100
74,699
45,288
General Fund
Final
Budgeted
Amounts
Cultural and recreation:
Recreation:
Salaries
Fringe benefits
Capital outlay
Actual
Exhibit B-1
7 of 8
Variance
With Final
Budget
420,724
132,822
220,766
67,253
413,344
130,357
174,295
66,243
841,565
784,239
Community Resource Center:
Salaries
Fringe benefits
78,255
20,731
18,640
72,372
19,350
14,848
Total resource center
117,626
106,570
Smith Park
22,200
17,027
Total Smith Park
22,200
17,027
5,173
981,391
907,836
73,555
1,644,570
672,244
1,642,697
655,200
1,873
17,044
Total debt service
2,316,814
2,297,897
18,917
Total expenditures
14,331,940
13,720,575
611,365
Revenues over (under) expenditures
(2,942,887)
(2,047,306)
895,581
Total recreation
Total cultural and recreation
Debt service
Principal
Interest and fees
57,326
11,056
General Fund
Final
Budgeted
Amounts
Other financing sources (uses):
Appropriated fund balance
Operating transfers from other funds:
Accommodations Tax Fund
Capital Projects
Capital Reserve
Debt issued
Total other financing sources (uses)
Revenues and other financing sources over expenditures
and other financing uses
Exhibit B-1
8 of 8
Variance
With Final
Budget
Actual
1,929,285
-
(1,929,285)
622,602
20,000
31,000
340,000
360,078
318,000
(262,524)
(20,000)
(31,000)
(22,000)
2,942,887
678,078
(2,264,809)
-
(1,369,228)
(1,369,228)
Fund balance, beginning
6,148,930
Fund balance, ending
4,779,702
Exhibit B-2
Capital Reserve Fund
Variance
Favorable
Budget
(Unfavorable)
Actual
Revenue:
Investment earnings
-
472
472
59,000
(31,000)
(28,000)
-
(59,000)
31,000
28,000
Total other financing sources (uses)
-
-
-
Revenue and other financing sources over other financing
uses
-
472
472
Transfer to General Fund
Transfer to Solid Waste Fund
Fund balance, July 1
424,667
Fund balance, June 30
425,139
Note: This fund is budgeted separately, but is consolidated in the General Fund for
reporting purposes.
Combining Balance Sheet
Other Governmental Funds
June 30, 2012
Total Other
Governmental Special
Revenue Funds
ASSETS
Current Assets
Restricted cash
Accounts receivable
Prepaids
Total assets
Liabilities:
Accounts payable
Deferred revenue
Total liabilities
Exhibit B-3
Total Other
Governmental Capital
Project Funds
Total Other Governmental
Funds
3,648,084
6,405
211,821
56,163
93,966
392,612
11,492
-
3,742,050
392,612
6,405
223,313
56,163
3,922,473
498,070
4,420,543
8,953
6,405
15,358
76,506
76,506
85,459
6,405
91,864
56,163
-
56,163
Fund balances:
Non Spendable
Prepaids
Restricted
Tourism
Public Safety
Committed
Administration
Public Safety
Total fund balances
3,501,523
289,465
59,964
3,501,523
289,465
59,964
3,907,115
420,784
780
421,564
420,784
780
4,328,679
3,922,473
498,070
4,420,543
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Other Governmental Funds
Total Other
Governmental
Special Revenue
Funds
Total Other
Governmental
Capital Project
Funds
Exhibit B-4
Total Other
Governmental
Funds
REVENUES
Restricted intergovernmental
Investment earnings
Miscellaneous
1,068,434
71,568
4,462
15,932
695
-
1,068,434
71,568
5,157
15,932
Total revenues
1,160,396
695
1,161,091
EXPENDITURES
Current:
General government
Public Safety
112,181
162,764
115,795
-
115,795
112,181
162,764
Total Expenditures
274,945
115,795
390,740
Excess (deficiency) of revenues over expenditures
885,451
(115,100)
770,351
Transfers in
Transfers out
(487,078)
(487,078)
398,373
(115,100)
(487,078)
(487,078)
283,273
3,508,742
536,664
4,045,406
3,907,115
421,564
4,328,679
Exhibit B-5
Other Governmental Special Revenue Funds
June 30, 2012
ASSETS
Current Assets
Accounts receivable
Prepaids
Total assets
Liabilities:
Accounts payable
Deferred revenue
Total liabilities
Fund balances:
Non Spendable
Prepaids
Restricted
Tourism
Public Safety
Total Other
Governmental
Special Revenue
Funds
Accommodations
Tax Fund
Emergency 911
Fund
Beach
Preservation
Fund
3,295,549
6,405
206,054
56,163
292,427
5,767
-
60,108
-
3,648,084
6,405
211,821
56,163
3,564,171
298,194
60,108
3,922,473
80
6,405
8,729
-
144
-
8,953
6,405
6,485
8,729
144
15,358
56,163
56,163
3,501,523
-
289,465
59,964
3,501,523
289,465
59,964
Total fund balances
3,557,686
289,465
59,964
3,907,115
3,564,171
298,194
60,108
3,922,473
Exhibit B-6
Other Governmental Special Revenue Funds
Accommodations
Tax Fund
Emergency 911
Fund
Beach
Preservation
Fund
Total Other
Governmental
Special Revenue
Funds
REVENUES
Restricted intergovernmental
Investment earnings
Miscellaneous
1,068,434
2,365
4,041
87
69,203
358
-
63
15,845
1,068,434
71,568
4,462
15,932
Total revenues
1,074,927
69,561
15,908
1,160,396
153,273
112,181
-
9,491
112,181
162,764
153,273
112,181
9,491
274,945
921,654
(42,620)
6,417
885,451
Transfers out
(487,078)
-
-
(487,078)
(487,078)
-
-
(487,078)
434,576
(42,620)
6,417
398,373
EXPENDITURES
Current:
Public safety
Total Expenditures
Excess (deficiency) of revenues over
expenditures
-
3,123,110
332,085
53,547
3,508,742
3,557,686
289,465
59,964
3,907,115
Special Revenue - Accommodations Tax Fund
Final
Budgeted
Amounts
Revenue:
Other taxes and licenses:
Accommodations tax receipts
Accommodations tax receipts, 2%
Total other taxes and licenses
Exhibit B-7
Page 1 of 2
Variance With
Final Budget
Actual
560,000
641,118
81,118
372,000
427,316
55,316
932,000
1,068,434
136,434
-
2,365
2,365
-
2,365
2,365
-
4,041
4,041
-
22
65
22
65
-
87
87
932,000
1,074,927
142,927
15,000
8,100
7,500
6,200
35,000
15,000
10,000
14,680
300
68,220
4,960
7,601
7,388
6,179
29,800
8,529
10,000
11,100
228
67,488
52,800
142,000
-
374,800
153,273
Restricted intergovernmental:
NCDNER mosquito control revenue
Total restricted intergovernmental
Investment earnings:
Interest earned
Miscellaneous:
Sand Project assessments
Interest earned on assessments
Total miscellaneous
Total revenue
Expenditures:
Cultural and recreational:
Professional services
Greenhouse expenses
Mosquito control
Beach access expenses
Erosion control expenses
Dune maintenance
Contracted services
Bulkheading
Boat ramp maintenance and construction
Oak Island pier
Commercial area improvement
Reserve - 2% Accomodations Tax
Total cultural and recreational
221,527
Final
Budgeted
Amounts
Exhibit B-7
Page 2 of 2
Variance With
Final Budget
Actual
Total expenditures
374,800
153,273
221,527
Revenue over expenditures
557,200
921,654
364,454
205,820
-
(205,820)
(622,602)
(23,000)
(117,418)
(360,078)
(23,000)
(104,000)
262,524
13,418
(557,200)
(487,078)
70,122
-
434,576
434,576
Transfers to:
General Fund
Solid Waste Fund
Golf Course Fund
Total other financing uses
Revenue and other financing sources over expenditures
3,123,110
3,557,686
Special Revenue - Emergency 911 Fund
Final
Budgeted
Amounts
Revenue:
State 911 Fund
Exhibit B-8
Variance With
Final Budget
Actual
69,203
69,203
-
69,203
69,203
-
-
358
358
69,203
69,561
358
16,870
39,977
66,003
16,801
39,973
29,460
25,949
25,947
Total public safety
148,799
112,181
36,618
(79,596)
(42,620)
36,976
79,596
-
(79,596)
79,596
-
(79,596)
-
(42,620)
(42,620)
Investment earnings:
Interest earned
Total revenue
Expenditures:
Public safety:
Maintenance and repair - equipment
Departmental supplies
911 service
Capital outlay
Revenue and other financing sources under expenditures
332,085
289,465
Special Revenue - Beach Preservation Fund
Final
Budgeted
Amounts
Revenue:
Investment earnings
Exhibit B-9
Variance
With Final
Budget
Actual
100
63
(37)
6,500
2,000
3,400
9,560
1,270
5,015
3,060
(730)
1,615
Total miscellaneous
11,900
15,845
3,945
Total revenue
12,000
15,908
3,908
Miscellaneous supplies
Float and other events
Beach lobbyist
Fund raiser events
Miscellaneous
Beach Preservation Newsletter
1,000
1,000
1,500
3,200
1,000
1,300
300
877
1,200
3,000
866
747
Beach Lover's Campaign
3,000
2,501
12,000
9,491
2,509
-
6,417
6,417
-
-
-
Total other financing sources
-
-
-
Revenues and other financing sources over expenditures
-
6,417
6,417
Miscellaneous:
Fund raisers
Donations
Memberships
Expenditures:
Cultural and recreational:
Total expenditures
Revenue over (under) expenditures
Other financing sources:
Fund balances, July 1
53,547
Fund balances, June 30
59,964
Exhibit B-10
Other Governmental Capital Project Funds
June 30, 2012
Police
Headquarters
Project
ASSETS
Current Assets
Restricted cash
Accounts receivable
Total assets
Liabilities:
Accounts payable
Total liabilities
Fund balances:
Committed
Administration
Public Safety
Total fund balances
77,286
Town Hall
Replacement
Capital Project
Total Other
Governmental
Capital Project
Funds
-
16,680
392,612
11,492
93,966
392,612
11,492
77,286
420,784
498,070
76,506
-
76,506
76,506
-
76,506
420,784
420,784
780
780
420,784
421,564
77 286
77,286
420 784
420,784
498 070
498,070
780
Other Governmental Capital Project Funds
Police
Headquarters
Project
Town Hall
Replacement
Capital Project
Exhibit B-11
Total Other
Governmental
Capital Project
Funds
REVENUES
Investment earnings
86
609
695
Total revenues
86
609
695
EXPENDITURES
Current:
General government
-
115,795
115,795
Total Expenditures
-
115,795
115,795
86
(115,186)
(115,100)
694
535,970
536,664
780
420,784
421,564
Capital Projects - Police Headquarters
Exhibit B-12
Project
Prior
Current
Total
Authorization
Year
Year
to Date
Revenue:
Interest on investments
207,427
208,119
86
208,205
207,427
208,119
86
208,205
165,140
838,647
27,996
5,160,245
165,140
838,646
27,995
5,160,246
-
165,140
838,646
27,995
5,160,246
49,059
49,058
-
49,058
6,241,087
6,241,085
-
6,241,085
Revenue under expenditures
Operating transfers in:
General Fund
Debt Issued
(6,033,660)
(6,032,966)
86
(6,032,880)
354,000
16,445
5,663,215
354,000
16,445
5,663,215
-
354,000
16,445
5,663,215
6,033,660
6,033,660
-
6,033,660
-
694
86
780
Total revenue
Expenditures:
Project expenditures:
Environmental remediation costs
Miscellaneous
Building construction
Capital Outlay
Total expenditures
Revenue and other financing sources over
(under) expenditures
694
780
Exhibit B-13
Capital Projects Fund - Town Hall Replacement
Project
Authorization
Current
Year
Prior
Year
Total
To Date
Revenue:
Restricted Intergovernmental
Rural Center PEG Grant
Investment earnings
Total revenue
Expenditures:
Capital outlay:
General government
Special inspections
Prof svc. - environmental remediation
Miscellaneous
Capital outlay - land
Land improvements
Construction
Site work
Furnishings
Equipment
Contingency
Total expenditures
Revenue under expenditures
Transfer to General Fund
Proceeds of installment purchases
Revenue and other financing sources
(under) expenditures
25,000
4,828
25,000
4,938
609
25,000
5,547
29,828
29,938
609
30,547
193,152
22,506
255,515
45,835
628,742
8,305
2,608,541
53,769
30,812
382,331
50,000
193,152
22,505
188,082
45,412
628,741
8,305
2,554,160
53,769
30,812
317,735
-
49,081
25,876
40,838
-
193,152
22,505
237,163
45,412
628,741
8,305
2,580,036
53,769
30,812
358,573
-
4,279,508
4,042,673
115,795
4,158,468
(4,249,680)
(4,012,735)
(115,186)
(4,127,921)
(650,320)
(351,295)
-
(351,295)
4,900,000
4,900,000
-
4,900,000
4,249,680
4,548,705
-
4,548,705
-
535,970
(115,186)
420,784
535,970
420,784
Individual Fund Statements and Schedules
Proprietary Funds
Water Fund
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) Budget and Actual (Non-GAAP)
Final
Budgeted
Amounts
Actual
Exhibit C-1
Page 1 of 2
Variance
With Final
Budget
Operating revenue: Charges for services
Charges for utilities
Reconnect fees
Late fees
Water taps
2,453,685
45,000
50,000
15,000
2,676,373
52,699
62,978
61,526
222,688
7,699
12,978
46,526
2,563,685
262,905
2,853,576
262,571
289,891
(334)
2,826,590
3,116,147
289,557
15,000
2,599
4,000
27,875
28,494
2,599
4,252
27,875
13,494
252
21,599
63,220
41,621
2,848,189
3,179,367
331,178
69,544
35,782
67,220
69,204
35,145
62,000
172,546
166,349
438,370
222,388
648,715
635,698
846,170
433,179
211,184
631,183
679,624
755,710
2,791,341
2,710,880
Total operating revenue
Non-operating revenue:
Impact fees
FEMA Reimbursement
Total non-operating revenue
Total revenue
Expenditures
Water administration:
Salaries
Fringe benefits
Total water administration
Water maintenance
Salaries
Fringe benefits
Capital outlay
Cost of water
Total water maintenance
6,197
80,461
Water Fund
Schedule of Revenue, Expenditures and Other Financing Sources (Uses) Budget and Actual (Non-GAAP)
Final
Budgeted
Amounts
Exhibit C-1
Page 2 of 2
Variance
With Final
Budget
Actual
Debt payments
Line relocation NCDOT
145,000
141,899
3,101
Total expenditures
3,108,887
3,019,128
89,759
(260,698)
160,239
420,937
291,314
-
(291,314)
425,698
425,698
-
(320,181)
(136,133)
(155,181)
(136,133)
165,000
-
260,698
134,384
(126,314)
-
294,623
294,623
Financing proceeds
Transfers to:
Wastewater Fund
Wastewater Capital Project
expenditures and other uses
Reconciliation from budgetary basis
(modified accrual) to full accrual:
Reconciling items:
Excess of revenues and other financing sources
over expenditures and other financing uses (above)
Financing proceeds
Principal payments
Book value of assets sold
Depreciation
Capital outlay
Increase in:
294,623
(425,698)
141,899
(30,104)
(176,395)
679,624
(9,701)
(14,734)
459,514
Exhibit C-2
Page 1 of 2
Wastewater Fund
Schedule of Revenue, Expenditures and Other Financing Sources (Uses)
Budget and Actual (Non-GAAP)
Final
Budgeted
Amounts
Variance
With Final
Budget
Actual
Operating revenue:
Charges for services:
In town utility charges
Caswell Beach utility charges
6,390,459
499,501
5,174,367
457,477
(1,216,092)
(42,024)
5,000
29,100
24,100
-
3,067
3,067
6,894,960
5,664,011
(1,230,949)
Impact fees
Sewer assessment revenue
Insurance refund
FEMA Reimbursement
Interest on sewer assessments
5,000
3,181,000
3,778
5,623
599,830
10,000
20,511
5,733,337
3,778
5,623
14,001
927,196
9,168
15,511
2,552,337
14,001
327,366
(832)
3,805,231
6,713,614
2,908,383
10,700,191
12,377,625
1,677,434
Salaries
Fringe benefits
Repairs and maintenance
210,366
83,990
111,300
204,147
76,475
103,536
Other operating expenses
Capital outlay
432,619
83,333
420,943
78,527
921,608
883,628
208,220
71,830
3,157,083
458,009
44,500
203,881
66,605
3,090,366
458,003
41,794
Other operating expenses
241,040
194,006
Capital outlay
194,681
191,429
4,375,363
4,246,084
Sewer taps
Total revenue
Expenditures:
W t collection
ll ti
Waste
Total waste collection
Waste treatment:
Salaries
Fringe benefits
County treatment capital charge
County treatment service fees
Total waste treatment
37,980
129,279
Exhibit C-2
Page 2 of 2
Wastewater Fund
Final
Budgeted
Amounts
Debt service:
Principal payments
Interest expense
Variance
With Final
Budget
Actual
1,951,591
5,077,010
1,585,248
4,982,729
Total debt service
7,028,601
6,567,977
460,624
Total expenditures
12,325,572
11,697,689
627,883
Revenue over (under) expenditures
(1,625,381)
679,936
2,305,317
2,173,039
-
(2,173,039)
320,181
405,200
155,181
405,200
(165,000)
-
(1,273,039)
(1,273,039)
-
1,625,381
(712,658)
(2,338,039)
-
(32 722)
(32,722)
(32 722)
(32,722)
Fund balance appropriated
Transfers from:
Water Fund
Sewer District Fund
Transfers to:
Wastewater Capital Project Fund
Excess of revenues and other financing sources
over expenditures and other uses
Reconciliation from budgetary basis (modified accrual) to full accrual:
Excess of revenues and other financing sources over expenditures and
other uses (above)
Payment of debt principal
Amortization of debt issuance costs
Amoritzation of premium and discount
Capitalization of equipment
Fixed Assets Donated
Wastewater assessments deferred
Accrued interest on assessments
Depreciation
Interest expense accrual
Sewer District Fund
Sewer District Fees
Interest Income
Transfer to Wastewater Fund
Capital projects:
Transfers to other funds
Transfers from other funds
NC Rural Center Grant
(32,722)
1,585,248
(98,158)
2,189
269,956
465,543
(5,330,328)
381,681
(3,126,267)
15,597
(14,578)
11,677
496,361
294
(405,200)
136,133
1,273,039
500,000
(3,869,535)
Exhibit C-3
Page 1 of 2
Wastewater Capital Projects Fund
Project
Authorization
Revenue:
NC Rural Center Grant-Phase I
NC Rural Center Grant-Phase II
Current
Year
Prior
Years
Total
to Date
500,000
96,849
-
500,000
96,849
500,000
2,487,000
2,302,812
-
2,302,812
-
400,000
-
400,000
2,987,000
2,799,661
500,000
3,299,661
5,314,050
5,314,050
-
5,314,050
Miscellaneous Revenue
472,665
72,666
-
72,666
Total miscellaneous
5,786,715
5,386,716
-
5,386,716
887,500
888,863
-
888,863
9,661,215
9,075,240
500,000
9,575,240
60,910,195
60,086,935
1,321,809
61,408,744
54,245,788
51,811,419
1,206,097
53,017,516
115,155,983
111,898,354
2,527,906
114,426,260
(105,494,768)
(102,823,114)
(2,027,906)
(104,851,020)
NC Clean Water Management Trust-Phase I
Brunswick County Reimbursement
Miscellaneous income:
Prepaid Discount Assessment
Investment earnings
Total revenue
Expenditures:
Capital outlay:
Wastewater System:
Phase I
Phase II
Total expenditures
Revenues under expenditures
Exhibit C-3
Page 2 of 2
Wastewater Capital Projects Fund
Project
Authorization
Transfers In:
General Fund
Water Fund
Wastewater Fund
Commercial Wastewater Project
Transfers Out:
General Fund
Water Fund
Wastewater Fund
Reuse Park Phase I
Debt issued
NC State Revolving Loan Fund-1st Allocation
NC State Revolving Loan Fund-2nd Allocation
Loan Proceeds-Land Acquisition
Revenue Bond Proceeds-Series 2008A-Ph I
Revenue Bond Proceeds-Series 2008B-Ph II
Revenue Bond Proceeds-Series 2011-Ph II
Revenues and other financing sources
over (under) expenditures
Prior
Years
Current
Year
Total
to Date
1,613,500
1,896,133
1,273,039
331,041
266,706
462,253
1,613,500
1,760,000
331,041
266,706
462,253
136,133
1,273,039
-
1,613,500
1,896,133
1,273,039
331,041
266,706
462,253
(1,613,500)
(1,760,000)
(10,055,102)
(331,041)
(728,959)
(200,000)
(1,613,500)
(1,760,000)
(10,055,101)
(331,041)
(728,959)
(200,000)
-
(1,613,500)
(1,760,000)
(10,055,101)
(331,041)
(728,959)
(200,000)
9,000,000
8,500,000
3,710,000
33,040,698
49,420,000
10,670,000
7,034,839
5,269,363
3,710,000
33,601,329
49,006,528
10,592,112
490,007
1,309,804
-
7,524,846
6,579,167
3,710,000
33,601,329
49,006,528
10,592,112
105,494,768
98,959,070
3,208,983
102,168,053
-
(3,864,044)
1,181,077
(2,682,967)
Combining Statement of Net Assets
Other Enterprise Funds
June 30, 2012
Exhibit C-4
Non-Major Enterprise Funds
Solid Waste Fund
ASSETS
Current assets:
Accounts Receivable, net
Other receivables
Inventories
South Harbour Golf
Course Fund
Total
252,192
50,550
1,073
-
139,236
8,300
391,428
50,550
1,073
8,300
303,815
147,536
451,351
5,304
82,884
688,417
(546,700)
1,401,795
98,205
73,471
(52,713)
1,401,795
103,509
82,884
688,417
73,471
(599,413)
229,905
1,520,758
1,750,663
533,720
1,668,294
2,202,014
55,555
5,794
5,302
6,025
4,773
498
5,471
61,580
10,567
498
10,773
66,651
16,767
83,418
17,619
3,987
5,472
17,619
9,459
Total non-current liabilities
21,606
5,472
27,078
Total liabilities
88,257
22,239
110,496
229,905
215,558
1,520,758
125,297
1,750,663
340,855
445,463
1,646,055
2,091,518
Total current assets
Non-current assets:
Capital Assets:
Land and improvements
Buildings
Motor Vehicles
Heavy Vehicles
Equipment
Less Accumulated depreciation
Total non-current assets
Total assets
LIABILITIES
Current Liabilities:
Accounts payable
Salaries payable
Unearned revenue
Total current liabilities
Non-current liabilities:
NET ASSETS
Invested in capital assets, net of related debt
Unrestricted
Total net assets
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets
Solid Waste Fund
REVENUES
Miscellaneous
Exhibit C-5
.
South Harbour Golf
Course Fund
Total
842,989
2,930
123,944
11,770
966,933
14,700
Total operating revenues
845,919
135,714
981,633
OPERATING EXPENSES
Administration
Waste collection and treatment
Depreciation
956,424
48,089
167,156
69,785
9,802
167,156
956,424
69,785
57,891
1,004,513
246,743
1,251,256
(158,594)
(111,029)
(269,623)
332
40,463
94
1,224
-
426
1,224
40,463
40,795
1,318
42,113
(117,799)
(109,711)
(227,510)
23,000
104,000
127,000
(94,799)
(5,711)
(100,510)
Total net assets - beginning
540,262
1,651,766
2,192,028
Total net assets - ending
445,463
1,646,055
2,091,518
Total Operating Expenses
NON-OPERATING REVENUES (EXPENSES)
Interest and investment revenue
Miscellaneous revenue
Total non-operating revenue (expenses)
Income (loss) before contributions and transfers
Transfers in
Exhibit C-6
Page 1 of 2
Combining Statement of Cash Flows
Solid
Waste
Fund
Cash Flows From Operating Activities
Cash received from customers
Cash paid for goods and services
Cash paid to employees
Net cash provided by (used in) operating
activities
South Harbour
Golf Course
Total
Fund
849,229
(811,047)
(140,031)
135,895
(115,822)
(121,579)
985,124
(926,869)
(261,610)
(101,849)
(101,506)
(203,355)
Cash Flows From Noncapital Financing Activities
Operating grants received
40,754
Transfers-in
23,000
104,000
127,000
63,754
104,000
167,754
(29,534)
-
(29,534)
(29,534)
-
(29,534)
332
94
426
Net cash provided by investing activities
332
94
426
Net increase (decrease) in cash and cash
equivalents
(67,297)
2,588
(64,709)
319,489
135,424
454,913
252,192
138,012
390,204
Net cash provided by (used in) noncapital
financing activities
40,754
Cash Flows From Capital and Related Financing
Activities
Debt proceeds
Acquisition and construction of capital assets
Net cash used in capital and related financing
activities
Cash Flows Provided By Investing Activities
Interest earned
Cash and cash equivalents:
Beginning
Ending
(Continued)
Exhibit C-6
Page 2 of 2
Combining Statement of Cash Flows
Solid
Waste
Fund
South Harbour
Golf Course
Total
Fund
Reconciliation of Operating Income (Loss) to Net Cash
Provided By (Used In) Operating Activities
(158,594)
(111,029)
(269,623)
48,089
9,802
57,891
3,310
228
3,310
228
956
(67)
(1,685)
181
(202)
(729)
181
(269)
(2,867)
7,324
1,199
-
(1,668)
7,324
Total adjustments
56,745
9,523
66,268
(101,849)
(101,506)
(203,355)
Adjustments to reconcile operating income (loss) to net
cash provided by (used in) operating activities:
Depreciation
Changes in assets and liabilities:
Accounts receivable
Inventory
Increase (decrease) in:
Accounts payable
Unearned revenue
Accrued wages
Net cash provided by (used in) operating
activities
Exhibit C-7
Page 1 of 2
Solid Waste Fund
Final
Budgeted
Amounts
Operating revenue:
Charges for collection
Variance
With Final
Budget
Actual
852,000
-
842,989
2,930
(9,011)
2,930
852,000
845,919
(6,081)
FEMA reimbursement
Solid waste disposal tax
35,799
6,000
35,800
4,663
1
(1,337)
500
332
(168)
42,299
40,795
(1,504)
894,299
886,714
(7,585)
141,093
54,665
243,626
27,560
446,510
139,964
52,694
226,247
27,555
446,503
Yard waste recycling
59,318
59,004
Capital outlay
29,540
29,534
1,002,312
981,501
20,811
(108,013)
(94,787)
13,226
Total revenue
Expenditures:
Salaries
Fringe benefits
Maintenance and repair - vehicles
Recycling program
Total sanitation operation expenditures
Total revenue under expenditures
Other financing sources (uses)
Transfers in:
Accommodations tax
Capital reserve
Revenue and other financing sources over (under)
57,013
(57,013)
23,000
28,000
23,000
-
(28,000)
108,013
23,000
(85,013)
-
(71,787)
(71,787)
Exhibit C-7
Page 2 of 2
Solid Waste Fund
Final
Budgeted
Amounts
Actual
Revenue and other sources over (under)
Capitalization of equipment
Depreciation
(71,787)
29,534
(48,089)
2,867
(7,324)
(94,799)
Variance
With Final
Budget
Exhibit C-8
Page 1 of 2
Final
Budgeted
Amounts
Variance
With Final
Budget
Actual
Operating revenue:
Annual Membership
Green Fee Play
Merchandise Sales
30,000
99,000
20,000
20,481
103,463
11,770
(9,519)
4,463
(8,230)
149,000
135,714
(13,286)
1,224
1,224
-
-
94
94
1,224
1,318
94
Total revenue
150,224
137,032
(13,192)
Expenditures:
Administration
Salaries
Fringe benefits
44,816
3,473
42,723
40,631
3,118
26,036
91,012
69,785
84,043
29,567
63,020
80,746
29,549
55,662
Total maintenance
176,630
165,957
10,673
Total expenditures
267,642
235,742
31,900
Non-operating Revenue
FEMA reimbursement
Total administration
Maintenance
Salaries
Fringe benefits
21,227
Exhibit C-8
Page 2 of 2
Final
Budgeted
Amounts
Total revenue under expenditures
Transfers in:
Accommodations tax
Revenue and other financing sources under
expenditures
Variance
With Final
Budget
Actual
(117,418)
(98,710)
18,708
117,418
104,000
(13,418)
117,418
104,000
(13,418)
-
5,290
5,290
Revenue and other sources under
Depreciation
5,290
(9,802)
(1,199)
(5,711)
Exhibit C-9
Sewer District Fund
Final
Budgeted
Amounts
Non-operating Revenue
Sewer District Fees - Current
Sewer District Fees - Prior years
Penalties and interest
Total revenue
Variance
With Final
Budget
Actual
400,000
5,000
-
450,182
18,715
5,297
50,182
13,715
5,297
200
294
94
405,200
474,488
69,288
-
-
-
405,200
474,488
69,288
(405,200)
(405,200)
-
-
69,288
69,288
Expenditures:
Total expenditures
Total revenue over expenditures
Other financing uses:
Transfers out:
Wastewater Fund
expenditures
Other Schedules
Town of Oak Island
Schedule of Ad Valorem Taxes Receivable
June 30, 2012
Fiscal Year
2011-2012
2010-2011
2009-2010
2008-2009
2007-2008
2006-2007
2005 - 2006
2004 - 2005
2003 - 2004
2002 - 2003
2001 - 2002
Uncollected
Balance
June 30, 2011
331,130
121,715
62,649
27,186
13,131
12,813
9,577
10,067
8,967
8,558
605,793
Exhbit D-1
Additions
6,830,366
1,117
-
Collections
and Credits
6,510,859
134,444
28,697
15,137
3,825
1,428
737
389
397
359
8,558
Uncollected
Balance
June 30, 2012
319,507
197,803
93,018
47,512
23,361
11,703
12,076
9,188
9,670
8,608
-
6,831,483
6,704,830
732,446
Less: Allowance for uncollectible accounts
73,279
Ad valorem taxes - net
659,167
Reconcilement with revenues:
Taxes, ad valorem, General Fund
Other credits and adjustments
Taxes written off
Less penalties and interest collected
6,735,314
3,629
8,551
6,747,494
(42,664)
6,704,830
Analysis of Current Tax Levy - Town-Wide Levy
Year Ended June 30, 2012
Exhibit D-2
Total Levy
Property
Excluding
Registered
Registered
Motor
Motor
Vehicles
Vehicles
Town-Wide
Town-Wide
Valuation
Original levy:
Property taxed at current rate
Registered motor vehicles taxed
at prior year's rate
Late listing penalties
Total levy
Discoveries:
Current year taxes
Prior year taxes
Penalties
Abatements
Total valuation
Net levy
Uncollected taxes at June 30, 2012
Current year's taxes collected
Current levy collection percentage
Rate
Total
Levy
2,464,321,150
0.2750
6,776,883
6,673,677
20,470,536
2,484,791,686
0.1550
31,731
710
6,809,324
710
6,674,387
6,363,920
0.2750
17,501
3,930
1,079
17,501
3,930
1,079
(533,818)
2,490,621,788
103,206
31,731
(1,468)
134,937
(1,468)
6,830,366
319,507
6,510,859
6,696,897
301,526
6,395,371
133,469
17,981
115,488
95.32%
95.50%
86.53%
Exhibit D-3
Agency Fund
Statement of Changes in Assets and Liabilities
Balance
July 01, 2011
Additions
Deletions
Balance
June 30, 2012
Fines and Forfeitures
Assets
Cash and investments
15,840
Liabilities
Accounts payable and accrued liabilities
15,840
-
15,840
-
15,840
-
Compliance Section
D .'
BRC
BERRY,
PADGETT &
CHANDLER,PLLC
CERTIFIED
PUBLIC
ACCOUNTANTS
OFFICES
IN
Southport.
NC
Shallotte.
NC
IRA WAYNE BERRY.
H. MENTON
PADGETT.
J. MICHAEL
CHANDLER.
CPA
CPA
CPA
Report On Internal Control Over Financial Reporting And On Compliance And
Other Matters Based On An Audit Of Financial Statements Performed
In Accordance With Government Auditing Standards
To the Honorable Mayor and the
Members of the Town Council
Town of Oak Island
Oak Island, NC 28465
We have audited the financial statements of the governmental activities, the business-type activities, the discretely
presented component unit, each major fund, and the aggregate remaining fund information of the Town of Oak
Island, North Carolina, as of and for the year ended June 30, 2012, which collectively comprises the Town of Oak
Island's basic financial statements, and have issued our report thereon, dated May 28, 2013. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States. The financial statements of the Town of Oak Island Board of Alcoholic Control were not audited in
accordance with Government Auditing Standards.
Internal Control Over Financial Reporting
Management of the Town of Oak Island is responsible for establishing and maintaining effective internal control over
financial reporting. In planning and performing our audit, we considered the Town of Oak Island's internal control
over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions
on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of Oak
Island's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of
the Town's internal control over financial reporting.
Our consideration of the internal control over financial reporting was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that
might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all such
deficiencies have been identified. However, as described in the schedule of findings and responses, we identified
certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
A deficiency in internal control exists when the design or operation of control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a
timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is
a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or
detected and corrected on a timely basis.
A significant deficiency is a deficiency or combination of deficiencies in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance. We consider the
deficiencies, 12-1, 12-2, 12-3 and 12-4, described in the accompanying schedule of findings and responses, to be
significant deficiencies.
PO. BOX 10339/
1123 N. HOWE STREET/ SOUTHPORT, NORTH CAROLINA 28461 /910-457-9455
FAX 91 0-457-5998
PO. BOX 579 / SHALLOTIE, NORTH CAROLINA 28459 / 910-754-4351
FAX 91 0-754-2931
MEMBER OF AICPA's, Private Companies Practice Section / NCA CPA's
Town of Oak Island,
North Carolina
Page 2
May 28,2013
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town of Oak Island's financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts
and grant agreements, noncompliance with which could have a direct and material effect on the determination of
financial statement amounts.
However, providing an opinion on compliance with those provisions was not an
objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed
instances of noncompliance or other matters that are required to be reported under Government Auditing Standards
and which are described in the accompanying schedule of findings and responses as items 12-1,12-2,12-3 and 124.
We noted certain matters that we reported to management of the Town of Oak Island in a separate letter dated
May 28, 2013.
The Town's responses to the findings identified in our audit are described in the accompanying schedule of findings
and response. We did not audit the Town's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, the governing board, federal and State
awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than
these specified parties.
May 28,2013
BERRY,
PADGETT &
CHANDLER,PLLc
CERTIFIED
PUBLIC
ACCOUNTANTS
OFFICES
IN
Southport,
NC
Shallotte,
NC
IRA WAYNE
BERRY,
H, MENTON
PADGETT,
J,
MICHAEL
CHANDLER,
Independent Auditor's Report On Compliance With Requirements Applicable To Each Major
Federal Program And Internal Control Over Compliance In Accordance With Applicable
Sections of OMB Circular A-133 and the State Single Audit Implementation Act
Honorable Mayor and
Town of Oak Island
Oak Island, North Carolina
Compliance
We have audited the compliance of the Town of Oak Island, North Carolina, with the types of compliance
requirements described in the OMB Circular A-133 Compliance Supplement and the Audit Manual for
Governmental Auditors in North Carolina, issued by the Local Government Commission, that could have
a direct and material effect on each of the Town of Oak Island's major federal programs for the year
ended June 30, 2012, The Town of Oak Island's major federal program is identified in the summary of
auditor's results section of the accompanying schedule of findings and questioned costs. Compliance
with the requirements of laws, regulations, contracts and grants applicable to each of its major federal
programs is the responsibility of the Town of Oak Island's management. Our responsibility is to express
an opinion on the Town of Oak Island's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; applicable sections of OMB Circular
A-133, Audit of States, Local Governments and Non-Profit Organizations, and the State Single Audit
Implementation Act Those standards, OMB Circular A-133, and the State Single Audit Implementation
Act require that we plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could have a direct and
material effect on a major federal program occurred. An audit includes examining, on a test basis,
evidence about the Town of Oak Island's compliance with those requirements and performing such other
procedures, as we considered necessary in the circumstances,
We believe that our audit provides a
reasonable basis for our opinion. Our audit does not provide a legal determination on the Town of Oak
Island's compliance with those requirements,
In our opinion, the Town of Oak Island complied, in all material respects, with the requirements referred to
above that could have a direct and material effect on its major federal program for the year ended June
30,2012.
Internal Control Over Compliance
Management of the Town of Oak Island is responsible for establishing and maintaining effective internal
control over compliance with requirements of laws, regulations, contracts and grants applicable to federal
programs. In planning and performing our audit, we considered the Town of Oak Island's internal control
over compliance with requirements that could have a direct and material effect on a major federal
programs to determine our auditing procedures for the purpose of expressing our opinion on compliance
and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not
for the purpose of expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the Town's internal control over
compliance.
PO. BOX 10339/
1 123 N. HOWE STREET/ SOUTHPORT, NORTH CAROLINA 28461 /910-457-9455
FAX 910-457-5998
PO. BOX 579 / SHALLOTTE. NORTH CAROLINA 28459 / 910-754-4351
FAX 910-754-2931
MEMBER OF AICPA's, Private Companies Practice Section / NCA CPA's
CPA
CPA
CPA
Page 2
May 28, 2013
Our consideration of internal control over compliance was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over compliance
that might be deficiencies, significant deficiencies or material weaknesses and therefore, there can be no
assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified.
However, as discussed below, we identified certain deficiencies in internal control over compliance that
we consider to be material weaknesses and other deficiencies that we can consider to be significant
deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal program on a timely basis. A material weakness in internal control over compliance is a
deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a
reasonable possibility that material non compliance with a type of compliance requirement of a federal will
not be prevented or detected and corrected, on a timely basis.
A significant deficiency in internal control over compliance is a deficiency or combination of deficiencies,
in internal control over compliance with a type of compliance requirement of a federal program that is less
severe than a material weakness in internal control over compliance, yet important enough to merit
attention by those charged with governance. We consider deficiencies in internal control over compliance
described in the accompanying schedule of findings and questioned costs in items 12-1, 12-2, 12-3 and
12-4 to be significant deficiencies.
The Town of Oak Island's responses to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. We did not audit the Town's responses and,
accordingly, we express no opinion on the response.
This report is intended solely for the information and use of management, others within the organization,
members of the Town Council, and federal and State awarding agencies and pass-through entities and is
not intended to be and should not be used by anyone other than these specified parties.
May 28, 2013
BERRY,
PADGETT &
CHANDLER,PLLc
CERTIFIED
PUBLIC
ACCOUNTANTS
OFFICES
IN
Southport,
NC
Shallotte.
NC
IRA
H.
WAYNE
MENTON
J. MICHAEL
BERRY.
PADGETT.
CHANDLER.
Independent Auditor's Report On Compliance With Requirements Applicable To Each Major
State Program And Internal Control Over Compliance In Accordance With Applicable
Sections of OMS Circular A-133 and the State Single Audit Implementation Act
Honorable Mayor and
Town of Oak Island
Oak Island, North Carolina
Compliance
We have audited Town of Oak Island, North Carolina, compliance with the types of compliance
requirements described in the Audit Manual for Governmental Auditors in North Carolina, issued by the
Local Government Commission, that are applicable to each of its major State programs for the year
ended June 30, 2012. The Town of Oak Island's major State programs are identified in the summary of
auditor's results section of the accompanying schedule of findings and questioned costs. Compliance
with the requirements of laws, regulations, contracts and grants applicable to each of its major State
programs is the responsibility of the Town of Oak Island's management. Our responsibility is to express
an opinion on the Town of Oak Island's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; applicable sections of OMB Circular
A-133, as described in the Audit Manual for Governmental Auditors in North Carolina, and the State
Single Audit Implementation Act. Those standards, applicable sections of OMB Circular A-133, and the
State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable
assurance
about whether
noncompliance
with the types of compliance
requirements
referred to above
that could have a direct and material effect on a major State program occurred.
An audit includes
examining, on a test basis, evidence about the Town of Oak Island's compliance with those requirements
and performing such other procedures, as we considered necessary in the circumstances.
We believe
that our audit provides a reasonable basis for our opinion.
Our audit does not provide a legal
determination on the Town of Oak Island's compliance with those requirements.
In our opinion, the Town of Oak Island complied, in all material respects, with the requirements referred to
above that could have a direct and material effect on each of its major State programs for the year ended
June 30, 2012
Internal Control Over Compliance
Management of the Town of Oak Island is responsible for establishing and maintaining effective internal
control over compliance with requirements of laws, regulations, contracts and grants applicable to State
programs. In planning and performing our audit, we considered the Town of Oak Island's internal control
over compliance with requirements that could have a direct and material effect on a major State program
to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test
and report on internal control over compliance in accordance with applicable sections of OMB Circular A133 and the State Single Audit Implementation Act, but not for the purpose of expressing an opinion on
the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the
effectiveness of the Town's internal control over compliance.
PO. BOX 10339/
1 123 N. HOWE STREET/ SOUTHPORT, NORTH CAROLINA 28461 /910-457-9455
FAX 91 0-457-5998
PO. BOX 579 / SHALLOTTE, NORTH CAROLINA 28459 / 910-754-4351
FAX 91 0-754-2931
MEMBER OF AICPA·s. Private Companies Practice Section / NCA CPA's
CPA
CPA
CPA
Page 2
May 28,2013
Our consideration of internal control over compliance was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over compliance
that might be deficiencies, significant deficiencies or material weaknesses and therefore, there can be no
assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified.
However, as discussed below, we identified certain deficiencies in internal control over compliance that
we consider to be material weaknesses and other deficiencies that we can consider to be significant
deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
state program on a timely basis. A material weakness in internal control over compliance is a deficiency,
or a combination of deficiencies, in internal control over compliance, such that there is a reasonable
possibility that material non compliance with a type of compliance requirement of a state will not be
prevented or detected and corrected, on a timely basis.
A significant deficiency in internal control over compliance is a deficiency or combination of deficiencies,
in internal control over compliance with a type of compliance requirement of a state program that is less
severe than a material weakness in internal control over compliance, yet important enough to merit
attention by those charged with governance. We consider deficiencies in internal control over compliance
described in the accompanying schedule of findings and questioned costs in items 12-1, 12-2, 12-3 and
12-4 to be significant deficiencies.
The Town of Oak Island's responses to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. We did not audit the Town's responses and,
accordingly, we express no opinion on the response.
This report is intended solely for the information and use of management, others within the organization,
members of the Town Council, and federal and State awarding agencies and pass-through entities and is
not intended to be and should not be used by anyone other than these specified parties.
May 28,2013
Schedule of Expenditures of Federal and State Awards
For year ended June 30, 2012
Exhibit E-1
Federal
CFDA
Number
State
Pass-through
Grantor's
Number
Staffing for Adequate Fire and Emergency Response
97.044
EMW-2008-FF-00526
147,168
213,726
Assistance to Firefighters FY 2010
97.044
EMW-2010-FO-05137
106,027
7,859
Marine Firefighting Capability
Public Assistance
Environmental Protection Agency
Passed through NC Department of Environment
and Natural Resources
Capitalization Grants for Clean Water State
97.067
97.042
2011-SS-00119-1007
FEMA-4019-DR-NC
14,000
47,322
15,774
Revolving Loan
TOTAL FEDERAL GRANTS:
66-458
E-SRF-T-09-0182
1,047,843
1,362,360
261,961
277,735
12,005
233,590
500,000
706,097
Grantor/Pass-through Grantor/Program Title
Federal
Expenditures
State
Local
FEDERAL GRANTS:
Department of Homeland Security
Passed through the North Carolina Department
of Public Safety
STATE GRANTS:
NC Rural Economic Development Center, Inc.
2008-2009 Clean Water Partners' Round I
Supplemental Grant
North Carolina Department of Transportation
Street Aid - Powell Bill
2008-290-40101-112
DOT - 4
1,485,460
TOTAL STATE:
1,362,360
Total Federal and State Awards
1,985,460
706,097
2,263,195
939,687
Notes to the Schedule of Expenditures of Federal and State Financial Awards:
1. The accompanying schedule of expendituresof federal and State awards includes the federal and State grant activity of the Town of Oak
Island and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the
requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the State Single Audit
Implementation Act. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the
preparation of the basic financial statements.
2. Loans Outstanding
The Town of Oak Island had the following loan balances outstanding at June 30, 2012. These loan balances outstanding are also
included in the federal and State expenditures presented in the schedule
Program Title
Water Pollution Control Revolving Loan Fund
CFDA
Number
6634.58
6634.58
State
Pass-through
Grantor's
Number
E-SRF-T-07-0173
E-SRF-T-09-0182
Amount
Outstanding
6,126,940
5,764,570
3 Subrecipients
Of the federal and State expenditures presented in the schedule, The Town of Oak Island provided State awards to subrecipients as foll
Program Title
CFDA
Number
State
Pass-through
Grantor's
Number
66-458
E-SRF-T-09-0182
Federal
State
Expenditures Expenditures
1,047,843
261,961
For the Fiscal Year Ended June 30, 2012
I.
Exhibit E-2
Page 1 of 4
Summary of Auditor’s Results
Financial Statements
Type of auditor’s report issued: Unqualified
Internal control over financial reporting:

Material weakness identified?

Significant Deficiencies identified
that are not considered to be
material weaknesses
Noncompliance material to financial
statements noted
yes
X no
X yes
no
yes
X no
Federal Awards
Type of auditor’s report issued on compliance for major Federal programs: Unqualified
Internal control over major Federal programs:


Significant Deficiency identified
that is not considered to be
material weakness
Any audit findings disclosed that are required
to be reported in accordance with Section
510(a) of Circular A-133
yes
_X no
X yes
no
yes
X no
Identification of major Federal programs:
CFDA
66-458
Program name
Capitalization Grants for Clean
Water State Revolving Fund
Dollar threshold used to distinguish
Between Type A and Type B Programs
Auditee qualified as low risk auditee?
$ 300,000
___ yes
_X_ no
Exhibit E-2
Page 2 of 4
State Awards
Type of auditor’s report issued on compliance for major State programs: Unqualified
Internal control over major State programs:


Significant Deficiency identified
that is not considered to be
material weakness
Any audit findings disclosed that are required
to be reported in accordance with Section
510(a) of Circular A-133
yes
_X no
X yes
no
yes
X no
Identification of major State programs:
CFDA / State Number Program name
DOT-4
NC DOT Street Aid -Powell Bill
2008-2009 Clean Water Partners’
Round 1 Supplemental Grant
II.
Financial Statement Findings
MATERIAL WEAKNESS – None
SIGNIFICANT DEFICIENCIES
Finding 12-1 Negative Fund Balance
Criteria: The Local Government Budget and Fiscal Control Act requires that each fund
have current assets sufficient to meet its current obligations.
Condition: Expenditures were made before budgeted revenues were received.
Effect: The town had a negative fund balance in the Waste Water System Capital Project..
Cause: Anticipated revenues were not available in the same period that expenditures were
made.
Recommendation: Expenditure should not be made until revenues are available.
Views of responsible officials and planned corrective actions: The Town agrees with the
finding.
Finding 12-2 Expenditures Exceed Appropriation
Criteria: NC General Statute 159-8 requires that expenditures may not exceed budgeted
appropriations..
Condition: At June 30, 2012, the expenditures in the Wastewater Capital Project
exceeded budget appropriations.
Effect: Over-expenditure of budget
Cause: Expenditures were not sufficiently monitored to allow timely budget amendments to
cover obligation of funds.
Recommendation: Constant review of expenditures to see that necessary budget
amendments are made and approved.
Views of responsible officials and planned corrective action: The Town agrees with the
finding.
Finding 12-3 Failure to Make Timely Deposits
Criteria: G.S. 159-32 requires that all monies collected or received by any department or
agency of a local government be deposited daily with the finance officer or in an official
depository.
Condition: Money is being collected at some departments or locations that is not submitted
to the finance officer or deposited in an official depository daily.
Effect: Failure to comply with State Statutes.
Cause: Failure of employees to understand Town policies and State Statutes relating to
cash receipts.
Recommendation: All employees that collect town revenues be trained in Town and State
requirements for handling cash.
finding.
Finding 12-4 Failure to Pre-audit Expenditures
Criteria: General Statute 159-28(a) specifies that before a local government incurs any
obligation, the finance officer must ensure that there is an appropriation in the budget
ordinance authorizing the expenditure.
Condition: Some purchases are made without proper pre-audit and by an employee not
approved to make purchases.
Effect: Violation of Town policies and State Statutes.
Cause: Failure of employees to understand purchase procedures and State Statutes.
Recommendation: Purchasing procedures be reviewed with appropriate employees.
finding.
Exhibit E-2
Page 3 of 4
III.
Federal Awards Findings and Questioned Costs
See item II above: Findings 12-1, 12-2, 12-3 and 12-4
IV.
State Awards Findings and Questioned Costs
See item II above: Findings 12-1, 12-2, 12-3 and 12-4
Exhibit E-2
Page 4 of 4
Corrective Action Plan
Exhibit E-3
I. Financial Statement Findings
Finding 12-1
Name of contact person: Bonnie M. Schwerd, Finance Officer
Corrective Action: The negative fund balances will be covered by inter-fund transfers until
additional debt proceeds or excess revenues are available.
Proposed completion date: June 30, 2013
Finding 12-2
Name of contact person: Bonnie M. Schwerd
Corrective Action: Monthly financial reports will be compared with budgets to allow timely
amendments of budgets.
Finding 12-3
Corrective Action: Training of appropriate employees will be given in daily deposit requirements.
Finding 12-4
Corrective Action: The Town will train staff on the pre-audit requirements and will review these
requirements at future staff meetings.
II. Federal Awards Findings
See Item 1 above: Findings 12-1, 12-2, 12-3 and 12-4.
III. State Awards Findings
See Item 1 above: Findings 12-1, 12-2, 12-3 and 12-4.
Summary Schedule of Prior Year Findings
Finding: 11-1 (Negative fund balance)
Status: The condition continues.
Finding: 11-2
Status: Corrected
Finding: 11-3
Status: Corrected
Finding: 11-4
Status: Corrected
Finding 11-5
Status: Corrected
Exhibit E-4

TOWN OF OAK ISLAND NORTH CAROLINA

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